Upgrade the D420 (Lighter, Faster, and more Expensive)
Dell needs a more powerful ultra-portable. This will obviously come with a higher price, but I think if the options were available, people would go for it. Now I'm not going to be like some posters who suggest a top of the line video card in this model -- frankly, it's an ultra-portable machine and people buy it for battery life and size.
1) Change the ram configuration. If nothing else changes, integrate at least 1gb so we don't have to waste a 2gb stick in the additional slot (to still end up with 2gb). Better yet, change the chipset to something that supports more ram (and dual channel if the current does not).
2) Flash: Best option would be to offer a 1.8" flash drive option (esp when those 64gb models hit the market). This would greatly improve performance over the current 4200rpm drive (which is the biggest current required trade off for the D420). Alternatively, at least integrate a few gigs of flash somewhere within the notebook. I hate a flash drive sticking out of something this small when trying too use readyboost.
3) There are better batteries out there in terms of size, weight, and power. Consider offering them. People will pay for them.
Please see Vida_K's comment below