The iPodTouch is a mass-marketed device, so its cost has been driven down. An 8Gb device costs only $230.
Its development environment nearly demands performance. Its development language is Objective-C or C and only one app can be run at a time. Contrast that with Sugar on X11 on Python on C and an environment that exhausts available memory with very little effort.
Its touch screen encourages interaction. The XOs flakey keyboard and touchpad discourage it.
I still love the XO and OLPC’s mission. The only thing that they seem to have accomplished, though, is the proliferation of Netbooks across the commercial landscape.