You think a card reader in a headphone jack is going to last long in a retail environment?
I admit this is purely anecdotal evidence, but as long as the reader itself is built well I see no reason why Square's reader wouldn't hold up in a retail environment.
If it really becomes a problem, there's no reason Square couldn't provide a reader similar to Verifone's. But with Square's method they get a ridiculously fast time to market across a wide variety of devices with far easier to manufacture devices and no lengthy Made for iPod approval times or worrying about supplies of iPod authentication chips from Apple.