I wonder if this is accurate:
Intel claims that they are quitting because of Nicholas Negroponte wanting them to stop the promotion of the Classmate/Eee to education in third world countries, but I think that the real reason is that Intel does not have a good enough processor for the OLPC project to use as an alternative to the AMD Geode LX-700.
Intel has not been able to develop a processor to match the price, power consumption and performance requirements of the OLPC project. Paul Otellini could have looked like a fool at the CES if he had to unveil an Intel powered XO that was performing worse in terms of price and power consumption compared to the AMD powered one.
This strikes me as the simplest explanation, given that Intel is first and foremost a chipmaker. I don't think they're making decisions based on personalities, politics or pedagogy. They're making an inexpensive, defensive move to protect market share. They don't really care about what OS or user interface you use, and they don't really want to be in the business of making and selling laptops.
Putting out an Intel-XO only made sense if they had a chipset that would jump a generation ahead of the current AMD hardware, particularly in terms of power consumption. It would have to be good enough that they wouldn't get 50% of the XO market, but that everyone would demand an Intel XO and send AMD back to the drawing board for a couple years.
Failing that, they're better off pushing their own laptop, because they can tailor the platform to their own chipset's advantages and subsidize its manufacture.
I've been revisiting my personal objection to Classmate in general. It pretty much comes down to the fact that I trust the track record and motivations of the OLPC more than Intel, in particular, Intel corporate (as opposed to the Intel Foundation, which is a long story itself). I just have little faith that Classmate would survive much past the point that it killed OLPC. If you think it would make sense for Intel's bottom line to keep it going indefinitely, you're delusional.