Ha, I was just reading about it!
Interesting idea, I can see it working for mobile players but I don't know how comfortable or functional the controller mode would be.
Plus if I've learned anything from my PSP it's that a drag-pad is not substitute for an analogue stick.
Also, why are the buttons backwards (SNES style)?
X
Y A
B
Instead of the standard (X360, Dreamcast):
Y
X B
A