I submitted the idea of using an screen like the iphone's in place of a trackpad last year to apple.
What it displays would dynamically change depending on the open app and cursor position. It would have side buttons like iphone icons on the screen and their action would depend on what the mouse is over. So if it's hovering over an image on a wepage the buttons are perhaps "save image, print image, copy image, copy image url, etc." then when the mouse is over a link it might say "open in new tab, new window, copy link, download linked file". Pretty much a lot of the options you get when right clicking on an object but without the clicking. The middle of the screen could be used to display animations on how to do different gestures, like a pinch zooming animation when you have a photo open in iphoto.
And adding 3.5" touch screens wouldn't add a whole lot of cost, look at the teardown costs of an iphone and look at what the screen costs, not very significant when you look at the price of a macbook pro. It wouldn't be near what an optimus keyboard costs with all it's tiny screens.