If it is $199, I bet that won't include the cover/keyboard which adds an additional $69.99 to the price.
$199 doesn't sound that crazy to me. Google and Amazon (Fire) have been making tablets in that price range for a long time. ZTE and other Chinese manufacturers have been producing them for even longer.
The only thing which we haven't seen before is a 10 inch device in that range, but with the costs of everything constantly coming down it was only a matter of time.
Keep in mind a lot of prices currently are based on nothing at all. There is no logic to a 8 GB and a 16 GB device costing sometimes hundreds of dollars different in price (for even a $20 production increase).
I will agree that Microsoft won't be making a cent on a $200 10.1" tablet; but we all know that that isn't their goal - their goal is to get people on the Windows Store.