The key limitation of course still being the physical display size and keyboard for fast typing.
Some time ago I said bye-bye to my POCKET PC, because my smartphone took over most things I would usually use PPC for. Back then, purchasing the UMPC (Raon Everun with 4.8" display and builtin keyboard), I thought that I might be able to get rid of laptop as well. I was wrong. While UMPC indeed runs any software I need, and if perfect for email on the road and relaxed reading, and browsing at home and while travelling, it just cannot replace the "typewriter" function of my laptop. Here is how my gadget usage patterns evolved since the UMPC came into my toolbox.
I still use phone for most of my communications, (GSM, Skype, Gtalk/Gmail, ICQ), PIM, RSS and GPS navigation. I keep several cartoons on memory card for the kids for the moments when I want to distract them.
Desktop is my multimedia and backup server. Torrented movies and Crysis on 1080p 40" screen.
Laptop is a typewriter for office and blogging.
UMPC is my computer on the go. Surprisingly, I came to the conclusion that it is size is not as imporant as weight. Most of the time that I am on the road, I still carry around a bag that fits A4 paper documents, and has no problem accomodating even a 12" Thinkpad X60. However, I do not like the added weight that Thinkpad brings, since papers are already heavy enough. Therefore, I would keep UMPC in this role in future as well, but I might upgrade to some 6-7" machine in future, when I see a model that goes for 8 hours and weighs around 600g.
I still use Pocket PC for book reading (excellent scrolling mode in Alreader2) and occasional Fring chat or skype call. It is mostly switched off these days.