"A kid puts his hand up. He tells me he's got a virus on his computer. I look at his screen. Displayed in his web-browser is what appears to be an XP dialogue box warning that his computer is infected and offering free malware scanning and removal tools. He's on a Windows 7 machine. I close the offending tab. He can't use a computer."
[...]
How the hell did we get to this situation? How can a generation with access to so much technology, not know how to use it?"
Why the hell do we expect kids to know things nobody ever told them that they exist? That seems to me like a more reasonable question. Kids don't know how human body works till we tell them, they don't know how to read unless we show it to them, why would we expect them to know how to reinstall operating system when no one ever used the word operating system in front of them?
If no one ever show RAM to kid, the kid wont be able to react on request to change it. That is the default state, the state when a kid knows a thing is a state achieved by somebody teaching the thing to kid.
Computers are now appliances rather than power tools.
I think that all the kids should be taught enough about computers to know it is no magic, that it is learnable and actually easy once you want to do it (and you dont actually need to be genius to learn it as many believe).
However, I really don't think they all need to know Linux administration.