In an announcement made on the Shuttle news section, they have selected Foresight Linux for the KPC due to its "intuitive interface and user focused design." The Shuttle KPC will also come preloaded with OpenOffice.org, Firefox, Pidgin, and other desktop packages.
Foresight Linux generally isn't considered one of the tier-one desktop Linux distributions, but it does stay in tune with the GNOME quite closely for showcasing the latest improvements with this desktop environment. Foresight also uses the rPath-developed Conary package manager, which is user-friendly but hasn't seen the limelight compared to Debian or Red Hat packages. We do have up screenshots of Foresight 2.0 Alpha from last November.
More information on this $199 Linux PC is available from the KPC Mini Site.