For the most part, the hardware is not "horrible", but by the fact that Openmoko is a tiny company, they don't have the purchasing power that Apple has to get newer hardware components at an inexpensive price point, hence the older ARM CPU and TI Calypso GSM chipsets. It's still plenty peppy enough and has enough RAM that I can run numerous applications at the same time without degrading performance of the entire system.
Certainly it's not as polished as the iPhone, but for people who actually care about their freedoms, it's fantastic. Even if for the simple reasons that I can flash my Neo at will, and that I have no limitations from the manufacturer as to what I can do with my phone, or how it can be used, it's the best smartphone/PDA I have ever purchased or used.
An OMAP3 sells for somewhere around $50 in quantity (I think).
From my understanding, Openmoko was very limited in choices for SoC, because they needed to stick with open chipset, low power, ARM systems; the crucial point is open chipset systems, which most manufacturers won't give you for anything cutting edge. When your primary goal is freedom, and you insist on getting parts with open specs and chipsets, you eliminate a lot of your potential choices.
If you NEED to have a backup phone, then it is still just an expensive toy.
The biggest problem with Openmoko is that nobody knows about them, and nobody realizes why they matter. Everybody sees the horrors going on between Apple, the App Store, and developers' applications being rejected for competing with Apple, and then they complain about it, but that's just the way it is.
Yet that's not how it should be, and if everyone could find out about Openmoko, and actually realize and know why their freedoms truly matter, and that Openmoko makes the most freedoms-loving phone on the planet, then I wouldn't have anything more to talk about.
But we all know that even Openmoko's unexpectedly high sales amounts for the FreeRunner is still only a drop in the ocean compared to even only the iPhone, and even less compared to the entire smartphone industry. And that's why it matters to me and others to get the word out, to let people know that there really is another option that doesn't squelch your freedoms, and that if freedom truly matters to you, then you do have a choice.
Freedom is Your Choice. I choose Freedom.
http://www.vimeo.com/1366042
From the video, it looks like the FreeRunner is a long way from a usable open phone. And not all the issues are with the horrible software it ships with. The hardware looks like it sucks, too.
Have you tried an iPhone? They're awesome.
edit: Other reviews I've found of the FreeRunner are absolutely frightening as well. It looks more like a $400 toy to hack on than a phone one might actually use.