If Firefox OS provides as good or better user experience than Android 2.1 on such modest hardware, Mozilla have every chance to carve out a market in low end smartphones.
Native apps, especially the popular ones are decent on a device like this. They were written for small screens and have a usage flow that is perfect for that form factor.
Most of the give-away phones (free on any contract or about $100 without) here in the US have better than VGA resolution, twice the resolution of this bottom-end screen.
It's a budget phone, this is obvious from the rest of the specs.
>Half the resolution of VGA makes it a bit useless for browsing the web.
320x480 is perfectly adequate. You do not need a high-DPI screen to browse the web - indeed, most desktop and laptop screens aren't high-DPI.
Now, you know what IS inadequate? 240x320 phones. They are genuinely useless for web browsing. But 320x480 is fine.
As an owner of a Nokia E5 phone with a 320x240 screen I beg to differ. From personal experience I have come to a conclusion that 320 by 240 phones are only useless if you are using a desktop-like (or even an iOS Safari-like) browser. Opera Mini for the E5 tries to reformat pages to fit the main text content a single column and uses Symbian's own fonts to fit more text on the screen, which makes browsing the web surprising adequate. I wouldn't call it a great experience but it's far from useless. It is particularly noticeable when you contrast the results with using Android's Browser or even the Android version of Opera Mini at 320x240, especially since you don't have to touch the tiny screen.
In short, I'd say it depends on the platform.