Much has been made about the tiny size of the Mac mini, with some people (including myself to an extent) wondering why Apple didn't make it slightly bigger to accomodate a 3.5" hard drive and more memory, and why they didn't include the keyboard and mouse.
1) The tiny size of the Mac mini makes it a desktop that is actually physically lighter and smaller than most laptops. The Mac mini's box is thus cheaper for Apple to ship, and the mini takes up a lot less retail shelf space. Furthermore, it becomes almost an impulse buy item. Anyone can walk out with a new Mac mini and just continue shopping. There is no need to bring the car around just to move it like with other desktops.
2) The tiny size and its good looks have struck a chord with customers, in a time when more or more market share is moving from desktops to laptops. In some ways, the mini shares some of the best features of both types of computers. The mini is small and inconspicuous if need be, yet has the low cost of a desktop.
3) The lack of an included mouse and keyboard is intentional, not only to lessen costs, but also to make the mini more flexible for the consumer. Despite my support of the one-button mouse concept, many consumers do prefer mice with two (or more) buttons. A mouse is a personal thing, and Apple has let the consumer choose. The same is true for keyboards, but more importantly, an included keyboard would make the mini's packaging too large. Also, for those who don't already have a keyboard, Apple has lowered their wired keyboard price to $29, and that includes a built-in USB hub. They have also dropped pricing on their mice and wireless keyboard too. This also helps retailers, who can sell more keyboards, mice, and other accessories, either bundled with with the Mac mini or otherwise.
4) The single memory slot can be an annoyance, although fortunately 3rd party memory is inexpensive, and it seems that those handy with a putty knife can install their own memory, without voiding the warranty.
Apple has responded to criticisms of their ridiculously high 1 GB upgrade price (well over US$400) by lowering it to US$325. In my opinion they did not go far enough, and should have lowered it to US$299. I say $299 despite the fact that 3rd party 1 GB DIMMs can be had for close to US$200, because I suspect one of the reasons for keeping memory prices artificially high is not just to pad the bottom line, but also to help 3rd party vendors. A $299 price for 1 GB memory at the Apple Store allows Mac oriented stores to sell the mini with 1 GB 3rd party RAM for less than what Apple charges, but a $299 price is still low enough to make 1 GB an impulse upgrade on the mini at the Apple online and Apple retail stores. Still, $325 is a lot better than it was a week ago, and I applaud Apple for coming as far as they have so quickly on this issue.
A second slot would have been better for consumers, and would have only impacted the size and design marginally, but Apple this time chose to use memory expandability as a product line differentiator, as an olive branch to retailers, and to save costs.
5) The mini's slot-load laptop optical drive is potentially more expensive, but it definitely saves space and makes the mini a lot smaller than most of even the small form factor PC solutions. 8X laptop DVD-R burners are also becoming plentiful these days, and despite the fact that Apple only lists 4X burners on the Mac mini page at the Apple Store (after a brief stint listing 8X burners), Apple has in fact shipped many minis with the 8X Matshita UJ-835F. I suspect, however, that once the iMac and PowerBook officially get 8X drives, the mini will too.
6) The 2.5" laptop hard drive is also more expensive, and slower, but again Apple chose size over raw speed, for the reasons above. The laptop hard drives also run cooler than the desktop hard drives, and for a small form factor machine, this can be a significant issue. For what it's worth, Apple is shipping Mini's with 4200 rpm drives which have a large 8 MB cache, and is even shipping some with 5400 rpm drives (with 2 MB cache).
All in all, I think Apple made the right decisions. Everyone loves the mini, including Apple, Apple's customers, and the retailers. In fact, Best Buy, USA's largest electronics retailer, hasn't sold Macs in years but plans to sell the mini.