The iPhone is a solidly specced device, it's not lacking in that area (except for maybe controls). No one should be arguing this. However, the specs are not what will hinder gaming on the iPhone.
The problem with the iPhone is that the market segment that it appeals to (and is priced for) does not perfectly overlap with the gaming market. Being that both the iPhone and gaming markets are niche markets themselves, this means that the potential profit on a game is minor. What this in turn means is that while small cellphone-esqe games may come to the iPhone, larger more costly games will likely not (or will be hardpressed to recoup their development costs).







