As is pointed out in the comments below, that's not a terribly good article.
It's certainly true that the amount of megapixels isn't the biggest contributor to the iPhone's camera being poor - the shittly lens, poor CMOS and lack of flash are (and bad software that doesn't offer some of the chipsets native features like video encoding). But that's not exactly a good thing, because none of those problems have been fixed either.
There's an argument in the thread that they wouldn't fit in an iPhone, but they certainly would (3.2 megapixel sensors with better light detection, a much better autofocus lens and a flash fit in a Sony Ericcsson K850i. It is a few mm thicker than the iphone, but the lens is behind the screen - on the iphone it isn't, it's on top, so there's the equivalent thickness available for the camera assembly internally). Nor would it add significantly to costs for manufucture. Which is why many other camera phones are able to offer it, and are better. My crappy old K750i was comfortably able to outperform my iPhone (especially in low light, which is REALLY important for a camera phone), and they cost an awful lot less to manufacture...
However, the notion that the extra noise and loss of light performance would lead to worse performance with more megapixels is flat out wrong. That doesn't apply until much higher megapixel counts (well, unless you're talking about truly terrible CMOS designs like you get in crappy disposable digital cameras). 2mp to 3.5mp would be an improvement. 5mp to 7mp wouldn't be, and indeed arguably counterproductive.
Phazer