It always amazed me that nobody thought that nice single and three speed bikes would sell okay, priced at $100 and $150. They don't have to be great, just comfortable and reasonably well built. Careful attention to geometry, parts design, and quality should get you something that is comfortable and reasonably nice looking as a commuter. Instead many of the commuters seem to be ridiculously expensive, charge a lot for more unused "features" or just too intimidating. The current round of commuters seem to be going for the iPod fashion market with the Giant Citystorm and the Trek Lime, but I do agree that they would be better off in Target with something cheap and reliable that gets people out of riding those crap mountain bikes that inevitably turn people off of biking.
Then again, I always thought Target should license the design of the Alta bike, make it a lot cheaper, and sell a bunch of them for $200 or so.