I've just come across a paper this past week discussing a research project funded by MS in India. This concept device was developed to explore low cost record keeping in rural India. The project was run with the assisntance of India's Self Help Group, a microfinance network.
This tablet is running custom software on top of Windows CE, and that screen is 3.5 inches across. If you'll click on the picture, you'll see that the writing on the paper matches what's on screen. The pen has a built in sensor that transmits the motions of the pen to the WinCE device.
Do you recall the Yifang Android tablet I showed you earlier this week? This is pretty much the same idea, except for the fact that this one costs a little more ($100 manufacturing costs) , does less, and is no where near ready for the market.
This paper is fascinating, but strictly from a usability viewpoint (I'm still reading it). The gadget is not that impressive.