Imagine as a developer having to switch to a keyboard with no tactile response. A completely button-less piece of glass with virtual keys on it. Your productivity would no doubt diminish greatly.
In addition, a large install base of these kinds of devices would make it easier and more profitable for studios to port their games over to the iOS platform, giving us even more game choices in the app store.
A lot of iPhone gaming takes place in short sessions, and I'm not about to keep snapping a coco on and off just for five minutes at a time.
In any case, I'd prefer it if studios didn't bother porting their games over to iOS. They're optimised for consoles, not for handhelds, and even with a millions cocos out there, the economics probably wouldn't be that attractive to most big devs when set alongside the hundreds of millions of people who don't have them.
That said, I'd like to see more titles or publishers supporting the project before pulling the trigger.
What bothers me the most is their belief that "Real Games Need Real Buttons". On the contrary, game devs seem to be doing perfectly well without buttons on smartphones, and customers don't seem to be complaining either, judging by the success of touch-native games like Angry Birds, Tiny Wings, Flight Control, Cut the Rope, etc. You might think that these aren't 'real games' but that's a remarkably narrow-minded opinion.
Regarding the price: the $42 coco is described as being "less than stores" which suggests a ~$50 price tag. If you got a few games for free, that'd be OK, but otherwise it's very steep.