It makes sense to close the lid to save power (since closing the lid disables the screen, which uses more power than anything else when playing music). It also makes sense to close the lid to make the device more compact and strong -- less likely to get damaged in case it accidentally gets dropped or whatever.
I wouldn't mind having the speakers in the sides of the base. There is no space in the lid, in the top of the base we can probably use the space for the keyboard and controls, and the backside is probably not a good idea. But the sides, it could work. My hands don't actually cover the sides when I'm holding my Pandora, they rather provide a shape that would more or less direct sound coming out of the sides to my ears. With the speakers in the sides, we would probably also get better stereo separation.