People will still be asking more and more out of netbooks.
Software requirements follow hardware performance, not the other way around. People don't write software that no computer can run.
People's computing demands are driven by the software they want to run. The major exception to this is when users get into the habit of multitasking. That will push up their computing resource needs, but probably only linearly, and certainly not exponentially.
Another major exception are graphics-driven applications. Those needs could be exponential over time. Hardware makers could make it purposely difficult to use the graphics processing for general purpose applications.
If hardware makers cooperated instead of competing, they could dramatically drive down their production (not to mention research and development) costs by agreeing upon that (artificial) limit (without a very large price premium). Thus, software for that platform requiring additional power would go unwritten, thereby not driving consumer demand for computational power upward.
I do not see how distributive computing is any better than a cloud ran by google. Distributive computing may be great marketing, a way to keep real total costs hidden, and good use of a market inefficiency, but I do not see the argument for it over making the market more efficient by reducing computational waste and taking into account total real costs.
I thought that cloud computing was distributed. Are you talking about a centrally-managed distributed computing? To be honest, the recent buzz about cloud computing sounds more like marketing than distributed computing. I would like to hear more about it with specific definitions that I can understand.
What I mean is, I think that a business model where ordinary people have proprietary devices with fixed (and minimized) computational power will drive up the cost of more flexible, powerful machines (like the PCs we are used to). They will only be affordable by institutions and the wealthy.
I believe that that would decimate the total surplus processing of humanity. The only ones who could then meaninfully contribute to distributed computing projects such as Folding@home would be entities with no incentive to do so. To me, that's the scariest part.
You bring up great points. You mentioned you were interested in seeing weaknesses in them. I assure you, I am even more hopeful that I am flat wrong, because otherwise the decisions as to what "very difficult problems" to try to solve will be decided by a very few people, certainly not us.