Mashable this morning reports that HP is releasing a digital picture frame called the Dreamscreen.  At first glance this thing looks like a tablet PC or perhaps even an e-reader, each of which would be great, but…it’s really just a big iPod.  Not even an iPod Touch.

The Dreamscreen will show pictures, play music, and show movies, all things that digital picture frames already do.  It will connect to the Internet over your wifi, so you can…no, no web browsing…so you can use Facebook, Snapfish, or check weather reports.  Who doesn’t need another way to get weather reports?

HP boasts that the Dreamscreen has “touch-enabled controls” which fooled Mashable into saying it has a touchscreen, but really this just means the controls are dark and hidden until you touch them, but they’re just regular old buttons.  The lack of a touchscreen means that the virtual keyboard they provide is navigated using their remote control – you have to scroll to each letter you want to type and hit “okay”.  If tiny little phones can have keyboards, why can’t this 10″ tablet?  I am NOT using Facebook with a hunt-and-peck keyboard I control with a remote.

Ultimately, I have no idea why HP would release this thing.  The Dreamscreen just doesn’t fill any gaps in the market.  It isn’t as useful or versatile as a Netbook or tablet PC, and it’s more expensive than a digital picture frame.  The glossy UI is still quite clunky, so the approach of targeting entry level users with ease-of-use isn’t going to work.  It definitely won’t attract many buyers at $249 for the 10″ or $299 for the 13″.

If HP was paying attention to the market, they’d give us a touchscreen wifi device with almost full PC functionality (or at least web browsing and media playback), ideally with an e-reader built in, all for $250.  Many netbooks aren’t far off from this spec already, save the touchscreen.  A product like that would sure scare the Kindle team, but for now they can breathe easy.

I hope the Dreamscreen is just HP’s way to dip its toe in the water and get its manufacturing line set up for a real tablet PC…we shall see.