I thought this was targeted at P&S upgraders but virtually none of them are going to want to use a prime ...
Looks like you and a lot of other people thought wrong
I'd price it at $599 with 18-55IS for P&S upgraders.
P&S upgraders are increasingly upgrading to smartphones
With a smartphone you can immediately post your photos to FaceSpace, you can't do that with an EF-M or a NEX C-3
As it is, it's $1100 to get one with the 18-55IS, where you can get a T4i (with flash, viewfinder, T/S LCD, better battery life, EF mount, and faster focusing) for $950 with the EF-s 18-55IS!
So what? A Rebel T4i won't fit in your pocket and a EF-M with the 22mm lens will. Besides, DSLRs are passé with the trendy/young/hip market. These people grew-up shooting photos with cell phones held at arms length, for them the lack of a viewfinder is normal. Time marches on
From Sansmirror http://www.sansmirror.com/newsviews/canon-announces-eos-m.html Canon's own positioning included this line: "...take-anywhere partner for a new breed of enthusiasts who chronicle their lives through images, without necessarily considering themselves to be ‘photographers’."
I think that says it all.