-2017 still hasn't seen USB-C overtake USB-A. Honestly, it's struggling to get mainstream support and the standard needs to be tightened so that consumers can expect any USB-C cable to be just as good as another, right now they can't and that's exactly why Microsoft didn't include it.
-The touch screen isn't the focal point of this device, it's simply a bonus. That being said, the form factor is not ideal for touch screen use, I agree.
-Windows 10 S is not at all Windows RT all over again. For one, it works on x86 architecture, not ARM, meaning Win32 apps packaged as UWP using the Desktop Converter and distributed through the store can still be utilized. Windows RT could not do this. RT also could be upgraded to Pro, S can.
-No expandable storage may be a downer for some, but as this is aimed at students, not professionals, average number of documents and documents sizes are going to be smaller and will likely be held in the cloud to a significant extent for the sake of mobility.
-720p is unfortunate for some, but bad connections have made every video call I've ever made less than 720p regardless of hardware on either end so it means little to me. Also, it supports Windows Hello which is awesome.
-I would argue that plenty of students have no need for a notepad like interface. Sure, it'd be nice to have, but it's not a deal-breaker by any means.
As with any Surface device, the price is high and the point is not for Microsoft to sell a ton of them, it's to inspire OEMs to go make their own devices that will sell tons of units. In this case that means low-cost notebooks aimed at elementary schools, not Macbook rivals, we already have plenty of those.