My two cents:
Are integrated graphics an unmitigated disaster in the new mini? Probably not. Are they part of the reason I'm not buying one, even though I just bought my first Mac (a 1.5GHz/Combo Drive PPC mini) a little over a month ago? Yes, definitely. Before the announcement, I was ready to buy an Intel mini if they used the Core Duo. However, the price, combined with the integrated graphics, has me back on the fence.
The basic problem, I think, is that the components on the Core Duo mini seem mismatched. If Apple had stayed with two price levels, but used a 1.5GHz Core Solo in the lower and a 1.67GHz Core Solo in the higher, we wouldn't be having this conversation. They could have put a Superdrive in the more expensive box, priced it at $699, and none of us would particularly care, because most of us aren't interested in a Core Solo-based box, period. They would have kept the mini as a low-cost, "basic computing" machine, and that would be fine.
The problem is that they went and surprised us by putting a Core Duo in the top-end machine, thereby getting the knowledgeable buyers' curiosity piqued, and then let that audience down by not delivering the complete package. If the mini is just intended for people to do "e-mail, internet, word processing", there is absolutely no reason to put the Core Duo in it. By putting the Core Duo in the mini (remember, just a slightly slower chip than what replaced the *G5* in the iMac line), you set up the reasonable expectation in the user community that this is more than just a "basic computing" box. When you then leave off a key component, that audience is, justifiably, going to be a bit mystified as to what you're trying to accomplish.
Then there's the price. At $799 with 512mb of RAM and integrated graphics, I really think a lot of people are going to need to max out the RAM in order to be able to do the sorts of things people will want to do with a processor as good as the Core Duo. I've maxed out the RAM in my PPC mini, and with the Intel box, even going to 1GB doesn't give you a TRUE 1GB (because of the RAM sharing). Since this is a dual-channel motherboard, you should only upgrade to 1GB or 2GB; a lot of users are going to need to choose the latter, and that pushes the total cost to over $1k - too expensive for a box with integrated graphics.
Even given all of that, I would probably still be tempted by this machine if there was a mid-price version with the Core Duo and a Combo drive (a similar setup to what I currently have). That way, I'd be able to max out the RAM and keep the total under $1k - this would at least be a serviceable photo-processing box, though it would still hamper my dabbling in 3D animation.
$1k is a barrier I'm not willing to cross for a machine that's going to limit me like that, and I don't think I'm alone. I'm not even asking for the same chip that's in the MBP/iMac - just something reasonably modern that won't bottleneck the system. If they had provided that, even at a slightly higher than $799 price, I'd be all over it. Unfortunately, I think they've hit on a price/component combination that's going to leave a lot of people hoping that the next announcement is a bit better.