angrypeng:
Hello everyone,
I would like to build a prototype as a proof of concept for a gadget I have designed.
Could you please provide some guidelines as to whether this is something I could build with ARDUINO?
Please bare with me, I am a SW guy 
It would be helpful if you told us what kind of processing you want done on the device. How big do you envision the program? How much data will be on the device. Unlike pc's and web servers, the memory on the Arduino is fairly limited. Also, are you building a one off device, or do you want/need to make hundreds if not thousands/millions? What is your budget?
angrypeng:
Specs
- Small electronic device approx 6x6 inches
Simple, though you didn't mention height and that can affect the final dimension. How finished to you want the device, and do you have skills in various things like wood working, plastic forming, etc.?
angrypeng:
- Wireless with rechargeable battery like those found in mobile phones
Fairly easy to do, though it depends on various factors of how long your battery lasts before being recharged (what kind of display you have, whether the device can be put to sleep, how much network traffic etc.)
angrypeng:
This may be the most critical part. In general, the e-ink displays were not setup for buying single unit items at the retail level and had expensive development kits. There were various articles about how to hack an existing display, such as the esquire display. If you are just starting out, it may be more complicated than you want to tackle at present.
I didn't recall that there were any e-ink displays at the usual places, but I noticed seeed studios just introduced their e-ink shield last week (talk about timing): http://www.seeedstudio.com/depot/eink-display-shield-p-1374.html?cPath=132_134
Note, the limited memory on the Arduino will limit what kind of graphics you can do on any display. If you restrict yourself to mostly text and bar graphs it should be fine. Similarly, if you are only going to display a couple of fixed pictures, it may be possible to store those pictures on a SD card and read the image out and send it to the device without having the whole image in memory.
angrypeng:
- 3 indication LED
- Switch on/off
Simple.
angrypeng:
- WiFi Connectivity: the device should be able to communicate with our web service
This restricts you some what, as you tend to need a wifi shield to add processing, but there are shields out there for the Arduino Uno R3. Note, as I mentioned before, the memory on Arduinos is limited, and the wifi library takes a lot of room, so depending on what you do, it may be a tight fit.
angrypeng:
If this is possible what board do I need to buy?
Maybe, it depends on what else you want to do. With the Arduino, e-ink and wifi shields, and battery, figure it will be about $150-200 (US) for the parts.
angrypeng:
If not can you recommend another platform?
The simplest might be doing your work as an Android app (maybe iphone app, but I don't do Apple), as it already has all of the parts, except it tends to not have e-ink displays.
Rasberry Pi coupled with a Wifi usb device would give you more memory and faster processor for wifi support, but it is less developed for the embedded side of things.