Magnetophoretic writing tablets were 3 for $10 at the drug store down the street last week. They don't require any power to draw, display, or erase and I'd guess their contrast ratio is better than the current electrophoretic/e-ink displays.. but the ones I got are cheap knock-offs. The true Magna Doodle has better resolution and contrast.
My exact thoughts when reading this, I was playing with a similar device yesterday but it was my daughters Dora the Explorer Magna Doodle... maybe TechCrunch should feature that next.
Reminds me of something fun we used to do when we had ample free time as kids: We would put random color patterns with crayons on construction paper and then overlay the entire page with black crayon and then scrape through the black to 'draw' with colored fills (the fills being the previously hidden background we made first).
Fingernails work, it's what I used when I did this a few times. Your nails just get really gunky :\ Otherwise, a smooth-edged knife works pretty well. Anything with a decent edge, not sharp. Rounded edges don't work.
Overlaying with black is, yes, covering the whole page with black crayon.
So, the steps:
Fill ENTIRE page with colored crayon patches / squiggles.
Color over ENTIRE page with black crayon. Try to make it TOTALLY black.
Scrape off with fingernail / knife / wooden clay tools / whatever.
Hang on the fridge to admire for several generations.
Ultimately, it's a cheaper way of doing those scratch-drawing things, and doesn't require sharp tools and a careful hand to not gouge the paper.
This is a good technique not just for kids, but for making art in general. I recommend trying it with oil pastels.
Also, the bottom layer need not be colored randomly, but could use a single color or maybe a limited-color palette. Likewise, the top color need not be black, but should cover the colors underneath. Lots of room for experimentation here.
My only recommended change would be that step #4 doesn't use nearly enough black. You don't just want to lightly color over the background, you want to literally put a layer of black wax on top of the background. When you're done, no color should really be showing through.
Reminds me of one of those neon static writing pages I had as a kid. You'd press on it with a stylus and it would stick to the backing, making the color change to be more bright. To erase, you'd just pull it from the backing to unstick it. Low tech stuff.
"This needs the ability to save to a flash drive and it would be golden"
As I understand it, this isn't possible; The board isn't 'displaying' anything, the stylus just presses on the crystal and changes the state of the crystal. The only time electricity is involved in the panel, is when you press the 'erase' button, which uses a single refresh of all the cells.
Since the 'state' is only in the LCD itself, adding on a method of saving the drawing/doodle, would require a lot more electronics, and cost, than there is. Probably magnitudes more.
If one could erase parts of the screen by themselves, a much larger version might be a clean replacement for a whiteboard. Perhaps a few colors would be required as well. And, the ability to save images. Now, it'll cost $3K.
