There is no indication whatsoever that Ubuntu will be able to reach "average joe", and building a product for audience you can't reach is pretty pointless. The only audience really using Ubuntu is one consisting of coders and geeks.
There's a famous russian chinese saying: When a rhino stares at the moon - he is wasting his spleen flowers.
I agree, if they had taken advantage of the fact that their competitors are spending lots of resources on simpler OSs for tablets etc and concentrated on providing the best Power User experience out there and spent the time they spent on Unity building really useful software I think there would be more of a business model for them.
1) Get people to jailbreak their tablets and install it. Fair enough but it will be very niche and more of a novelty, will never reach critical mass to get useful commercial apps. Will probably get picked by Chinese manufacturers who will resell cheap tablets with Ubuntu re-themed to look as much like iOS as possible, probably called iBuntu or something.
2) Make deals with manufacturers and produce mass market tablets, they will have to compete head on with android and I'm not sure what their USP would be here. They would either need 100% android compatibility or would need to magic allot of app developers out of thin air.
3) Go exclusively for niche markets, for example selling to car manufacturers developing bespoke in-car entertainment systems. This would be a whole new business strategy for them and would basically remove the need for the "ubuntu project" as it exists today.
They did (sort of) reach a mass audience through Dell's Ubuntu laptop program in 2007. It didn't quite work out then because Ubuntu wasn't ready (I owned one, it was not ready for prime time). It still isn't, but it's closer. If it was ready, then avoiding the Windows tax would be a good enough reason for retailers to push Ubuntu.
The issue with pushing Linux onto unwitting users is many don't understand it's incompatible with their Win32 software and end up returning the computer. Therefore Dell had to put up a big "here be dragons" page in front of the Ubuntu systems.
If this were to actually work, they would need some sort of huge mass marketing campaign which convinced people they actually want or need Linux on their computer, which is very unlikely. Defining your audience as people who want to save the 5% cost of a Windows license cost from their already cheapass PC is never going to amount to much.
Your point is valid, but it's becoming less so. The web is taking over more and more of what used to be desktop territory, and the OS is becoming a device driver for the internet. There are plenty of people now who just need something that will run a web browser (granted, there are also still plenty who have to have MS Office or whatever).
The more cheapass the PC, the more of a difference the Windows Tax makes. $50 out of $1000 is only 5%, but $50 out of a $115 Walmart computer[1] is pretty substantial (not that Walmart is likely to be paying that much for a Windows license, but at the low end a little bit of money makes a big difference).
The point wasn't whether people do or don't need Windows software, it's that you can't just throw Linux systems on the market unless the consumer feels they have some compelling reason to buy one.
And MS does scale their license prices based on the system costs, but I think you've demonstrated one can always find a cheaper PC without switching to Linux.
A cheap PC would be cheaper without an MS tax, unless MS was willing to give Windows away for free to keep Linux from getting a foothold. Sure, the money may not be much, but if you don't perceive a difference in quality, you'll buy the $.98 can of beans over the $.99 one. $115 is hardly a theoretical lower bound to the price of a PC.
There are also large organizations that would like to cut costs wherever they can, and can't be expected to make up the Windows tax by installing crapware like a vendor can. The city of Munich is the most well-known example of a big player switching to Linux. The effort was not a complete failure but was something of a disappointment - I don't think Munich ended up saving any money when you consider the labor costs, etc. But if Linux had been ready and the transition had been more successful, you'd see a lot of imitators following Munich's lead.
But it's probably a moot point anyway. I think Android will end up swallowing the PC market like a classic disruptive technology and stealing Linux's thunder anyway.
There's a famous russian chinese saying: When a rhino stares at the moon - he is wasting his spleen flowers.