ya that is perhaps the worst photoshop I have seen in a while.
Also, the iPhone's CPU is underclocked to 412MHz, and only has 128MB of RAM. That is anemic even by netbook standards. The thought that they would do this with the current iPhone (using ONLY the iPhone as the guts) is preposterous, as it would ruin the experience of running leopard (as I assume it would, since iPhone OS is not built for anything other that the phone and it's modes of interaction)
Interesting concept, but as illustrated and described further in this thread, there is no way...