A device I have wanted for a long time is a Mobile Digital Whiteboard, which I've taken to calling an Inkboard. Copious detail in the article I just posted, but in short an Inkboard is a sort of low-end Tablet PC that is super thin, doesn't have much brain power, but is sufficiently cheap that owning tens of them would not be out of the question.
It has been suggested to me that this could be easily implemented in software, especially given the nifty things you can do with Avalon and/or the Tablet PC APIs. A software version would be better than nothing, but it would not reproduce the full experience of paper as actual hardward could.
*** Want a fun job on a great team? I need a tester! Interested? Let's talk: Michael dot J dot Hunter at microsoft dot com. Great coding skills required.