Everyone knows the eMac needs replacing, or (at the very least) some re-positioning. And it makes sense to drop eMac prices a bit further, but it might not be viable to do so with the current design. Therefore, stripping parts and going for a headless design makes sense, especially for the education market. It also makes for easier maintenance and hardware support.
And yes, it might appeal to people as a second computer. It might even sell a lot more due to the iPod halo effect, but with only 256MB of RAM and 40GB of disk space as a baseline, it will not be a stellar performer (my 800MHz G3 iBook works just fine for me, but it has 768MB RAM, not a piddling 256 - which is barely enough for decent web surfing).
Still, if it's true (and do bear in mind that there are umpteen unfounded Apple rumors a year), it might be just the thing to put an end to all those weekends doing free helpdesk work for your family members (who will be fine with 256MB RAM anyway).
Plus, with the right tweaks, it might just make for an interesting set-top box.
Let's wait and see. But please, no more wisecracks about single-button mice. Any mouse works fine on Mac OS X (including wheel and multi-button mice). That kind of humour is sooooo Windows 3.1...