As a piggyback off of Matt Asay's recent experience with various Linux distros on netbooks I too have a recent example with our middle son and Ubuntu.
The other day I came across a slightly used Asus Eee 900 netbook on Craigslist for around $125. I was looking for another one anyway for our high school age kids and I was specifically asked to get one with Linux and not XP. While we have both OSes in our house the PC's running Ubuntu Netbook Remix 9.04 have quickly become the go-to devices for getting on the web. They are also much easier for me to manage and "deploy" in my home. No defragg'ing, anti-virus, or malware to worry about just make sure the browser can play Flash and java and we're off to the races.
They are just as comfortable in picking up my G1 running Android as they are using a PC with XP, Linux, etc. The key is the interface and how easy it is to get up and running and being productive. Operating systems now need to be "point and click" like an iPhone because that's the PC that our kids are now familiar with. Users are not interested with what's under the hood, just the 0-60 times.