The OLPC organization is built to do hardware innovation. Of the many things they've attempted, it's the one thing at which they have clearly been wildly successful. They put the fear of God into Intel and forced the worldwide introduction of the Netbook, thus driving down the median price of personal computing all over the world -- whether you choose to give them credit for that achievement or not. Their decision to focus on hardware innovation as a core competency is a good thing, not a bad thing.
Is the challenge of educating every child in the world bigger than OLPC can handle? Why, yes. Yes, it is.
There's the problem of open educational resources, which is being attacked by organizations like OER Commons and Curriki and UNESCO, and possibly even by the United States federal government. Did you know that the Hewlett Foundation actually has a logic model for the development of open educational resources, which they now apply to every organization who comes to them for requests to fund education projects?
There's the problem of open source software suitable for use by kids, which is being attacked by organizations like Sugar Labs and the KDE Education Project and GCompris and Squeak -- all of whom have successfully deployed software that is now being used by lots and lots of kids. None of these projects are perfect, but all are continually improving.
Guess what? OLPC was *bad* at these things. That's why they have, quite sensibly, left those problems for other organizations to solve. OLPC is now, and has always been, a single piece of a very large puzzle. The shrill cries that "OLPC HAS FORGOTTEN TEH KIDZ!!!!" are at best, unhelpful, and at worst, ridiculous.