True, but the constraints of a netbook actually serve as an incentive to think things through rather than start right away with exploratory code.
I recently coded a personal site (around 5,000 lines) almost entirely on an Acer Aspire One with a small display and a cramped keyboard, and I made sure I knew exactly what I wanted to write before sitting down (usually during lunchtime).
So, 'make it painful to code, buy requiring your code to be written on substandard equipment' makes you think more about what you're going to do, because the experience of using it is painful and substandard. I'm not sure I'd like to put myself through that.
Also: I'm pretty sure those tiny keyboards are NOT ergonomically up to snuff for anything more than basic web/email usage. My wrists hurt after about 30 minutes of typing on them - I can go for hours on my full size keyboard though...
Everyone is different. I can type without pain on a netbook keyboard for arbitrary periods of time. I can type faster on my HHKB, however.
(Of course, the HHKB is as easy to carry around as the netbook, so I usually don't have to use the netbook keyboard. Once you get past the keyboard, a netbook is a full machine like any other. Except it weighs nearly nothing and it can live for 14 hours without a power outlet.)
Until I upgraded my work room with a wall-length desk, I did most of my development on my eee pc 1000he. I got used to the small keyboard very quickly and the small screen was only somtimes a hinderance (in fact, the only time was when editing GUIs in Qt Creator - it got a bit cramped then).
The speed was also rarely an issue. Clojure starts a bit slow, but everything runs perfectly fine. Admittedly, I mainly use lightweight tools like vim (I did once fire up eclipse, but it was so painfully slow, I promptly (as promptly as it let me) uninstalled it again).
I actually bought the eee pc for development. I find it extremely useful to have a small and light laptop which i can throw into the bottom of a bag and bring with me wherever. I got it for the freedom of being able to work on the bus or in a cafe without the hassle of a heavy or bulky laptop.
I do use a decoration-free window manager though, so I don't have screen space wasted on window borders, title bars or taskbars.
I've mainly been using my dual monitor desktop machine since I "upgraded" my work room, because I now have a very spacious desk and it makes sense to me to have plenty of screen space too (and I've been doing more GUI development recently too), but I still ocasionally pick up the eee pc to hack something together, especially when I'm not near my desk.
I recently coded a personal site (around 5,000 lines) almost entirely on an Acer Aspire One with a small display and a cramped keyboard, and I made sure I knew exactly what I wanted to write before sitting down (usually during lunchtime).