Apple doesn't compete on price, they compete on Quality. That is EXACTLY why MS spent 3 years engineering a device of such quality.
That's all fine, but I think you may be missing my point. The issue is the way that they are entering the market with this device. It could have been much more exciting at a lower price point. Look at the crazy sales of Android tablets at lower prices. Instead of spending billions marketing the Surface, MS could have come in at a lower price, excited all the tech enthusiasts like us, and then carved out a real piece of the market.
The current market is literally saturated with Apple iPads. If MS goes after Apple in this manner at the exact same price-point they're playing against the iPad's strengths. There's much less differentiation. People who already have an iPad aren't going to pick up a Surface at this price. At a lower price they might. That would build momentum.