In the short run, this may look like good thing. However, the fear is that this price decrease by Intel is only temporary in order to drive out competition. Then, once OLPC has gone under because no governments ordered their product, Intel will raise their prices. With no alternatives, governments will be forced to pay the higher price. So, in the long run, this might cost governments more money than going with OLPC.
Moreover Intel laptops are coming with Microsoft Windows XP or Linux, I suspect that Microsoft is giving support to Intel's laptop project to move their 6 year old operating system in to the developing countries and hence to create a strong user base for their windows products in future and hence the lock-in. Ultimately what both Microsoft and Intel wants is to improve their market share in the developing countries.
What Intel is doing here with OLPC is not actually a healthy competition as many may think. Actually it's an anti-competitive behavior.
If I have a boatload of money sitting around so I can sell my product at a loss, I can guarantee that no one will ever be able to beat me in terms of price.
Healthy competition is companies competing to have the most efficient system so they can produce more product for less.
For sure, Microsoft is looking into the student's market of developing countries to create its future customer base. As you remember Bill Gates in China introduced the $3 bundle of Windows XP and MS Office to governments in poor countries that subsidize computer purchases by students.
Now $3 may look like a great price for MS Office 2007, However it's the Home and Student Edition and it doesn't come with PowerPoint. Also the version of Windows XP is Windows XP Starter Edition which is basically a crippled version of six year old Windows XP operating system, with networking disabled and multitasking severely limited.
OLPC has, against all odds, come up with a spectacularly appealing machine that has real promise to truly change the world. As for Intel, it should really have better things to do than to combat a non-profit effort that seems to be making a difference.