I don't understand why CSS or HTML are being mentioned during the design of Arc. These seem like library issues and your announcement of Arc was spoiled IMHO by the "rant" about HTML and tables. This is only made worse by the Arc Challenge which seems to be more about the design of libraries for HTML/HTTP etc. than the language.
If your language doesn't support anything but toy apps it quickly evolves to be optimized for building toys.
If the first Arc apps had not been full-featured Web apps, but had instead looked like examples from SICP, everyone would be complaining that the language was only good for computing Fibonacci sequences and writing interpreters for itself.
OTOH, you can't expect a new language to immediately offer the library resources of, say, Perl.
So the plan for Arc's early days seems to be similar to what the Pragmatic Programmer guys called the "tracer bullet" approach:
Tracer code is not disposable: you write it for keeps. It contains all the error checking, structuring, documentation, and self-checking that any piece of production code has. It simply is not fully functional. However, once you have achieved an end-to-end connection among the components of your system, you can check how close to the target you are, adjusting if necessary. Once you're on target, adding functionality is easy.
On day zero, Arc let you construct and deploy every aspect of a useful software system (a web app)... but it took a very narrow and direct path to that goal: emphasis on tables, no Unicode support, borrowing some functionality from an existing Scheme environment, etc., etc. That is what PG was trying to convey in his announcement: the strategic plan for Arc's early days is to work on designing a complete skeleton, but not add a lot of flesh.
I could tell from all the people already dissing Arc before it was released that whatever I released was going to be attacked on any possible pretense. So, like someone bracing himself to be hit, that was what I was thinking about as I was about to release it: what are people going to seize upon as a way of attacking it? Which meant that was what much of the initial announcement ended up being about.
It was a pretty odd situation to be in. If I'd been releasing Arc into a neutral environment, I probably would have said what I wrote in http://paulgraham.com/core.html. But maybe it's just as well I gave all the flames something to expend themselves on before talking about subtler questions.
I thought you handled it pretty well. Basically, you wrote a big sign saying "here is the bike shed", to make sure bike-shed commenters had something to occupy them. :)
Actually, it's probably beneficial to encourage flames. Your users are hackers, and flamewars are the only form of public dialogue among hackers. Ergo...
What am I missing?