[ladyada]

These boards are not as much competitors to the Arduino, they are upgrades. And they're quite hard to use if you've never done any electronics. Which is why you'll see everyone start with Arduino and then eventually move up.

Besides, if someone's going to fry their first board (and they will), it should probably cost $30, not $100+ The $30 price point is a major bonus that overrides performance/price.

* or one can replace the processor for <$5

[atduskgreg]

Dead on. Also, the main point when you're getting started with physical computing is not the processor, but the actual hardware you can plug into it, the LEDs, buttons, motors, thermistors, etc. One of the Arduino's really big advantages for beginners is that it is relatively "transparent" in terms of cognitive, cost, and setup overhead in this regard. It gets you to actually plugging things into it and seeing them blink the fastest and cheapest by an order of magnitude.