Great Analysis
You are absolutely right, that most iPad users do not want a PC stuffed into a tablet. What they want is a smartphone with a screen large enough to make reading emails, webpages, facebook and yes, the occasional book a truly pleasant experience. They are not interested in the heavy duty tasks that require a PC...they already have a PC for that.
Microsoft's bet is based on two things.
1 - That some users want a PC in tablet form.
These are the ones that really need Surface Pro. They need to connect to domains, and use all their Windows apps, and do things that require more processing than a smartphone can provide.
2 - That users will enjoy having the same interface on their iPad-like tablet and their PC.
Imagine switching from PC to tablet and not having to learn new skills. For all the things you do on a glorified smartphone, both your tablet and your PC do them exactly the same way. Check your email, read websites, facebook, twitter, etc. All the same across both tablet and PC. I think it is a great idea, if MS can make it work, and that is the big question.
If Surface, and other Windows RT tablets can do all the things that the normal user (defined above) does on their iPad or Android tablet, then Windows RT is a viable alternative, and it becomes much less scary when they go to buy a new PC and it has Windows 8 on it.
Apple can only match that my crippling their desktop OS. I am not sure if Google can match it at all.
If you want a tablet, the question could become, step up from a smartphone, or step down from a desktop. With the dominance of Windows in the desktop market, I think this could work, but it is a big bet and only time will tell if it is a good bet.
Oh, and for all the Applefanboys, don't bother telling me that an iPad is more than just a big smartphone. In most ways, and for most people it isn't. Most people do the same things they can do on their smartphones, but the tiny screen makes reading webpages and watching videos less than ideal. The big screen fixes that. By definition, any app that runs on an iPad could be made to run on an iPhone, but is it really worth it? No, so in one way, the iPad is more than a giant smartphone, but with the same OS, and the same hardware, the only real difference is the larger screen, so we are both right.
