Fellow Nexus One user?
My guess is that it wasn't supposed to sell that well. Android prospers when it's on more phones and more carriers made by more manufacturers. If Google, who provides Android, starts offering their own phones at cutthroat prices that are better than the others, will the others want to stay with google, who are starving them of profit by offering better phones? No. So google sells the Nexus One for a lot of money. Then, the only people who will buy it are people who are really knowledgeable about phones. They get their own "special phone", reserved almost exclusively for them because no one else wants to pay 530 for a phone. They then can explain to less tech-savvy friends about what android is, why it's good. I know personally I have convinced 4 friends to get android phones and helped all of them with finding quality apps and tweaking the experience to make it optimal. So I'd say it helps google drum up business, keeps devs and knowledgeable people happy by making sure they have their own phone, and doesn't compete too heavily with companies like motorola who are pushing full on android and making hundreds of thousands of android phones.