Indeed.
In fact, I think they may live to regret this.
It'll be fine while they cut deals with makers of closed, non-extensible, hardware (netbooks, smartphones, pdas), but once people can install it on any old x86 PC, with any old harware bits and bobs, from umpteen manufacturers, Google are going to have to face the exact same problems that have held Linux back from mainstream consumer adoption!
Because of the Google branding, people are going to install it and assume it will 'just work'. It won't. Then Google will have a ton of egg on their smug, 'do no evil', faces.