From a pure technology standpoint, they could come together in two to three years. Optimize standby mode and hard drive caching, and there's no reason they couldn't.
I'm not sure I'd say the PPC is all that stable. Soft resets are a fact of life, and people have been putting up with hard resets and loss of all RAM data for years.
My point about the whole PPC/MicroPC thing is that it's more possible to make the PPC more than it is, right now. 1gb flash ROM should be standard as the minimum for all WM2005 devices, but you know it won't be. The manufacturers will hail 256mb as some grand improvement, even though it's now laughable.
I think the standards for usability that you're setting as the floor of capabilities is reasonable.
And I'm not suggesting that in every case these Micro PCs or an enhanced PPC could replace a desktop for everyone. Some people, but not everyone.
But for people who travel (which might not really be that big a market), a pocket sized near-desktop (ND

) device could really be a boon.
It doesn't take much imagination to see how such devices could be used for business presentations as well as entertainment. I think the Linux base of the new Archos PVR/PIM/Internet device (which is currently vaporware) is going to hold it back from serious market penetration in the business sector. But if the same device had been WM based with full program compatibility, it would have been
the device we'd covet. It really isn't much bigger or heavier than a PPC.