The iPod Touch also has no buttons. Even though the DS has a touchscreen, there are very few games that use it exclusively; it seems that many of the games that use it do so only for the novelty, much like the detecting-blowing-via-the-microphone gimmick. Although I'm sure people can come up with compelling games using only the touchscreen, I think it would be hard for the iPhone to take on the DS and PSP's "twitch" game audience.
Given the iPhone's unconventional input techniques and the 1-2 years of lead time needed for a professional game, I wouldn't consider an iPod Touch price drop as a sign of interest in gaming. Rather, I'd look for Apple to purchase or contract existing game studios... ideally a year ago.
Having spent the better part of this morning playing cro-magnon rally and super monkey ball, I have to say that you are quite incorrect. The d-pad is so 1990. Accelerometers are where its at today. With the multi-touch touchscreen the ipod touch and iphone are going to get a lot more use out of their touchscreen as an input device than the DS did...
Given the iPhone's unconventional input techniques and the 1-2 years of lead time needed for a professional game, I wouldn't consider an iPod Touch price drop as a sign of interest in gaming. Rather, I'd look for Apple to purchase or contract existing game studios... ideally a year ago.