It would have been nice, but it's certainly not essential -- not by a long shot.
Keep in mind that, while many people wouldn't use it, many others would, and I'm sure app writers would find some cool uses for it. To those people who say, "I wouldn't use it": sure, but you're not the center of the universe, and, just because you wouldn't use it, that doesn't mean that others wouldn't.
That said, the iPhone is a tradeoff between features and price/profit. At the moment, the iPhone doesn't have any really big competition, although Android and Pre may become such in the future. Because of this, Apple doesn't really need to add hardware like a front-facing camera,
now, because that would increase the cost and decrease Apple's profit. Of course, depending upon future competition, Apple could certainly add such a feature, later, since new iPhone models need to continually have new features of some type.