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The OLPC project seems to be making the same mistake that Pepper Computer did with the Pepper Pad. They both designed complete environments on top of a standard Linux/X11 base, and both made interfacing to the thousands of existing Linux/X11 applications difficult.
In Pepper's case it essentially killed the company, because the customer base for its closed environment (home entertainment) was not there at its price point. If they had made interfacing to existing apps easier, then its customer base would have included enthusiasts in various areas looking for a simple inexpensive portable machine to run their programs. This might not have been enough to save the company, but it would have helped. Note that Pepper Computer has not actually closed down, but they are unlikely to produce any new products.
I don't think it is as serious for OLPC, partly because the barriers to using existing apps is lower and partly because developer interest is higher. What OLPC needs is a way to simply integrate existing apps into their framework. Even a user-extendable (or freedesktop conforming) menu of non-Sugar apps selectable within Sugar would be a start.
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