Not a great computer. They would want windows, if they were used to xp/98, and to run things like word. The OS should also be booting from a proper hard drive or SSD shouldn't it. Booting from a USB stick would be slow, and probably not that reliable long term, as those things wear out. Monitor sounds average without a brand. Possibly has poor viewing angles and the cheapest TN screen you can get. Persoanlly I think they maybe better buying a cheap laptop, which you can get a reasonable one with better specs for not much more.
What size is the usb? No optical drive? Most people expect to play CD and DVD on their desktop computers.
Linux is not necessarily a problem depending on the distribution. Libre Office is pretty damn good replacement for Word. Ubuntu has a nice UI for installing Skype and any other software. Obviously there is going to be a bit more user support required than XP because it is so different.
What Linux distribution are you using and what kind of boot times are you getting from USB? What kind of performance do you see for typical tasks like web browsing, document creation and editing, and streaming media viewing?
Having the OS on a usb stick seems very risky. AFAIK they provide nowhere near the ongoing error protection of standard drives.
the prototype is using a Awyun A1-1001 case and 250w psu; picked up one off trademe for $60 including shipping. does not seem to be any stock ,are there suitable alternative cases in the same price bracket?
considering the lower manufacturing costs im surprised there isnt a deluge of cheaper DTX/miniITX cases on the market.
Have you considered how you will handle warranty? With a monitor included it seems like it is in the reasonable price range.
Imho you will need to do some research on the USB you choose to ensure you are getting a genuine brand with good life from it. Also the external mounting does not seem like a great idea in the average environment.
When the user begins digital photography or something similar then storage may become an issue. Workflow is usually import > edit/enhance. Cameras tend to react badly to inplace editing on the camera card itself.
You will spend a lot of time with the user explaining how to do normal maintenance tasks like upgrading an application or upgrading the operating system (use the LTS version for sure) but it seems like an interesting experiment.