Now a new accessory may go a long way towards alleviating those concerns. The iControlPad is an iPhone accessory that adds physical buttons and joypad. It slides onto the iPhone like a case (providing some protection) and offers a PSP-style form factor. The hardware interfaces via the Dock connector and is already supported by some of the emulators that run on jailbroken iPhones. They're also planning full SDK support once iPhone 2.0 ships, presumably next month.
The iControlPad is still in development and is not yet for sale. However, they are offering development kits to qualified developers.