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Why would anyone pay over $1800 just to access the hardware?
(source: http://gizmodo.com/5015540/iphone-3gs-true-price-compared)

And without a contract $599 for the 8GB version or $699 for the 16GB model.
(source: http://news.cnet.com/8301-17938_105-9981676-1.html)

In this generation of iphone can't be a viable gaming platform. If people are shying away from spending $400 on a console that can bust a graphical groove, why would they spend $200/$300 more for Dreamcast on the go?

And don't gimme "it's a phone/multimedia machine too" because the demographics are different.