Saying the the CPU will barely handles playing music is not true as well.
The 200 Mhz TI Omap processor is more than able to play music, I have a Qtek S200 (HTC Prophet) with the same processor and it's a great music player.
I use it to stream music over A2DP. I can also play full screen 320x240 movies without slowdown with TCPMP.
Sure, me as well don't quite understand the logic behind this model.
I suppose HTC wants to extend its line-up of device, and offers some cheaper device, like the P4350 compared to the Tytn or this one compared to the P3600.
It's also means more design to chooses from for its OEM clients, who likes to have an exclusive design in their market.
As for media oriented phone, most of them come with only 256, or even less, if you take a look at SE devices for examples.
More storage is availabe through Micro-Sd Card, which nowadays are available up to 2Go.
Whats defines a Media-Orietend phones today -when most high-end phones can play music and have memory card slot- is more some accessible music control button, and marketing
