If you look at the current market, the trend is clear: Windows tablets and Windows phones pretty much own the low-end of devices, with devices like the HP Stream able to get relatively good displays (1280x800), high performance (Atom Z3745 quad core), and a good single-user experience into a $100 un-subsidized package.
The next step is obvious: eliminate Windows phone and Windows RT, and run full on Windows 10 on a 5inch (or bigger) device with a telephony stack. What can you do with this device that you can't do on regular phones?
- The Windows phone web-browser is easily the weakest browser on modern phones today. Replace that with IE 11 on Windows 8.1, and you go from the weakest browser to the most powerful browser on a mobile device, with full on access to services that Google (for instance) deliberately locked away from Windows phone devices like Youtube, Maps, and other services.
- With a full-on Windows host and x86 processor, many of the appstore advantages that Android and iOS have become irrelevant. For instance, Garmin connect doesn't have a Windows app, but if you run real Windows on your phone, who cares? The same goes for photography apps.
- Remote management and central device management for enterprises become a non-issue, since a Windows 10 phone would easily be managed using the same techniques desktop PCs can.
- Application developers can abandon having to cross-compile for multiple platforms and go back to optimizing only for the x86 platform.
- Viruses and malware target Windows. Who would want a virus on their phone? The answer to this is obvious: a locked down Windows 10 phone would only accept apps from the Windows app store, eliminating the possibility of viruses and malware. This contradicts #2 above, but just like on Android, you could have a checkbox that lets you access the full on OS for power users while protecting the naive ones.
- The telephony stack on Windows 8.1 is non-existent, and Intel's SOFIA LTE chip isn't slated to launch till mid-year 2015. An immature telephony stack could create lots of problems. On the other hand, unlike the huge variety of devices that Windows has had to contend with in the past, having just one chip to target to could make the telephony stack relatively stable.
- Having a Windows desktop available doesn't necessarily make a 5" phone form factor usable. In particular, with a 1080p display on a 5" phone, the UI elements on the desktop would be pretty much unusable. The UI issues that need to be overcome would be considerable. Note that with a phablet form factor (6" and up), this issue would be largely mitigated.