Excuse my ignorance, but for what reasons could an out-of-the-box WinCE device, with the right application, not be used as a universal remote?

No reason, other than the IR range on some units might not be up to the task.

Palm Pilots do it now and the built in IR is an issue.

There is shareware available in Beta called SkyCommander that runs on WinCE devices. I tried it on my HP620LX and, although it worked fine, wasn't really what I wanted. I saw the Pronto the next day and had it within the hour!

The reason that many palm PCs can't be used for remote control is that 'consumer' IR is different from 'comms' IR that these devices are primarily designed for. The guy that wrote SkyCommander managed to use a feature of the chipset in the 620LX to produce consumer IR.

For more info, take a look at [Link: web.singnet.com.sg]

J. (Eagerly awaiting ProntoEdit!)

The IR support for Windows CE devices conforms to a stanard called IrDA, which is meant for very high speed communication within a short range (0.5 to three feet). The coding schemes used for consumer electronics are low speed over a much longer range (eight to thirty feet is typical). The design of the IR optics and other considerations means that even if the electronics support both IrDA and CE protocols, the range would be a maximum of about six feet, and would be very directional.

Another issue is battery life. Windows CE devices are designed to perform well under a very different usage model than a remote typically experiences. Thus it's extremely unlikely that you'll six months battery life out of a Windows CE device, even if you use it as a remote :-)

Aside from those little items, sure, you could use a hand-held PC or Pilot :-) In fact, the processor in the Pronto is the same one used for the original Pilot. But just about everything else was designed specifically for its purpose as a remote control. There's a lot more to it than just wiring some chips to an LCD and batteries...