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Until someone comes up with an LCD screen with 15+ hours battery life, they won't challenge dedicated ebook readers. And even then, it'll be touchy--one of the appeal points of dedicated readers is the small size; they fit in a purse or large pocket. (Well, most of them. The Ebookwise-1150 is a bit of a stretch for that, but it's also ancient tech as these things go.)
While netbooks could be pitched as ebook devices (or, "books and games and hey, you can check your email too!"), they aren't likely to catch on for the non-techie crowd until they match the Kindle/Sony/Bebook convenience factor: load it up with content, drag it around in your bag, and when you've got time, you can read it. Netbooks & other laptops take near-daily maintenance; if you set it on the shelf for a week, the batteries are dead & it's not ready to go when you need it.
And while LCD screens take a long time to bother me (erm, after a week of 10 hours a day in front of the screen, I notice my eyes hurting), some people are bothered much sooner. And computer screens & programs both don't seem to be working towards good ebook functionality--rotatable screens, software that manages both an ebook library and individual book notes (annotations, where-I-left-off settings, etc.). (There are programs that do this, but the only ones I've seen only manage 1 filetype.)
Devices like iPhone/iTouch may compete, because they're portable enough for people to put up with short battery life. But it's been plenty mentioned that 3" screens have limited appeal; they're not going to displace devices that look like books.
"Looks like a real book" may be a bigger selling point than a lot of us tech-savvy ebookists think about. It may not matter how perfect the netbook gets, even if it folds the keyboard under the screen for easy reading with just a slider on the side to scroll through pages--if it says "computer" and not "book" in the owner's mind, it may not catch their interest as a book reader.
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