Depending on how it's being handled, this could allow them to produce the systems cheaper. I also think this is intended to be more competitive with consoles than PCs. And yeah, the target audience for Steam Machines is not someone who is going to be comfortable opening it up and swapping out components anyway.
And I don't think the annual upgrades are a bad thing, it means you can upgrade at your own pace. Look at all the people who were begging for new consoles 3-4 years ago but had no option to upgrade.