I think there are two things that a lot of the tech blogging community are missing (primarily those who focus on gadgets). First of all, Google is not a hardware company, it's a software company. From their perspective this whole venture is not about the Nexus 1, it's about the store. Would they have sold a lot more phones if they sold it at best buy and T-mobile stores? Of course they would have, that wasn't the point.
Second, Google is not a hardware company, it's a software company (echo?). The mentality and business model is considerably different from a regular electronics manufacturer. For example, when Apple releases a new product, they do so with the maximum hype possible, dramatic unveilings, black turtlenecks, and massive ad campaigns. By comparison, Google's approach is "Hey guys, we've got this idea we've been kicking around. We'd figure we'd let you try it, but we're going to keep it as an invite-only beta for awhile first " While it's an approach that may lack style, they make up for it with frequent iterations and improvements. It also minimizes risk on inevitable failures. Everyone's aware that the Macbook Air was more or less a flop, and given another chance I don't think Apple would have put the resources into developing it. By comparison, do you think the man on the street knows what 'Knol' was?
In this light, the way Google's handled the Nexus 1 release makes more sense. You obviously can't beta test a store, so instead they've opted to start small. They're moving into new territory with this experience, and like any good software company, they're expecting bugs. Judging from the fact that they've had significant issues with handling customer trouble-shooting, it's a good thing they did.
Ultimately, the success of this venture isn't going to depend on final sales numbers of Nexus 1s, it's going to depend on the ability of Google to get manufacturers and wireless companies on board with this sales format, and their ability efficiently run it. It's also not going to have chance to really shine until the major wireless companies all switch over to LTE. Until then we'll just have to wait and see.