"Actually the DS has a touch screen which allows it to almost replicate the dual-analog sticks. So there are FPS games for the DS that use this."
With that I guess we're just going to have to agree to disagree. IMO just because you can slap a couple of "virtual joysticks" on the screen and pull input data from them does not mean you have a system that replicates dual-analog sticks, and I say that as both a programmer and a gamer.
"There are tons of iOS games that utilize the iphones touchscreen perfectly for good controls, so it's absolutely possible to design good controls into games."
Like I said, for some games, yes, you can have good touchscreen controls. But by limiting the system to only touchscreen controls you're cutting out a giant amount of games that could otherwise run fine on the hardware but whose controls do not naturally map to touchscreen.
Yes, you could produce a version of New Super Mario Bros that used a virtual touchscreen joystick, but it wouldn't be the same game, at all, because the physical nature of the controller has a huge impact on overall gameplay. Nintendo above all other companies recognizes this (thankfully), which is why they have continued to find success even after down periods in their hardware cycles. If they gave all that up and just focused on the iOS market, that would be the worst thing to happen to gaming since Looking Glass went under.
"It's just like when the DS came out and they started designing games to take advantage of dual screens, touch screens, microphones, and cameras."
When the DS first came out, games went crazy trying to support the touchscreen because of the novelty, yes, but well within a year of the system's launch they started to pull back on that and produce games with largely classical controls that only used the accessories for little flourishes and not for main gameplay. Why? Because there are a LOT of games that require physical switch controllers to play correctly. (The same applies to the Wii where they went nuts with motion control and eventually started using that primarily as a flourish for most games, because not all games are a natural fit for motion control).