The CrunchPad is dead: I used past-tense.
But no, the iPad is going to bury itself because it's locked-down and feature-anemic. Any competitor can beat this, and many are coming.
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I agree with your assessment of Apple's tablet, but I think you underestimate their position. The vast majority of consumers simply don't have the awareness of such issues to even care. To a degree, the same criticism applies to the iPhone and it's been an overwhelming success. Competing with Apple is no small task. Features aren't enough when they have market share, mind share, are able to set trends and have a marketing department that has convinced the world they are the only company able to do the things they do.
You're right, of course. Market share and mind share are important. But this is something new, and products like this have to go through the diffusion of innovation from early adopters to get to the early majority and I personally know of no early adopter who is happy with this thing (all of whom had an iPhone when it launched, etc). The word among early adopters is "bullshit". I don't care who Apple is, or who they think they are, they can't beat that.