Do you have link to the $120 Cedar Trail system you are speaking of?
Here's one (just the motherboard for $79US -- add a DIMM and some kind of storage, stick in a box):
http://www.amazon.com/dp/B0079VVLZG
I haven't bought one yet, but am eyeing them for my next gadget project. Intel has a family of boards in this price range.
The GMA3650 (aka PowerVR SGX545) graphics chipset used by Cedar Trail is not supported under Linux: http://communities.intel.com/message/158477
Not quite (this was discussed just yesterday). There's a framebuffer driver that works just fine. There's a binary GPU driver you can grab from the MeeGo archives which will run on current i686 distros. Graphics are about as well supported under linux (which is not to say "well") as this device is, which limits you to this "Puppy Linux" thing.
And of course for things that are not graphics, it's a PC, not a no-name ARM SoC. You can run RHEL or Ubuntu on it, plug in your favorite PCI card, etc...
Note that there are passively cooled (albeit larger: ITX) Cedar Trail boards available now for about 60% more (total system cost) which outperform this box by a factor of 8x or so, and consume about 30W peak. They have hardware accelerated video too (though the GPU acceleration requires proprietary 32-bit-only drivers).