I could not agree with you more. While I have no idea what Taiwan's actual military strength is, I wouldn't be surprised that it has the capability to defend itself. While it may not win an outright war with the mainland, I believe it has the capacity to slow down any PLA advance until the US military arrive.
Thank god for the Taiwan Strait. If it wasn't for that body of water, the PLA would easily overwhelm Taiwan thanks to its size. I was in Taiwan last year and the entire city of Taipei was shut down for close to half an hour during last July as there was a military drill (not sure if it was the airforce or not, but I would assume it was because of the noise in the iar).
Nonetheless, you didn't address the issues of missiles. While no one knows for sure how many missiles the PRC have aimed at Taiwan, one can safely assume that it's a significant number. The PRC can just fire away and cause massive civilian casualties. Having said that, this doesn't necessarily make it easier to invade Taiwan, but it further drives down the fear to the Taiwanese not to miscalculate. This can be said to the PRC as well. If they miscalculate, they will pay a heavy price as well.