Yes, it is great that some random portion of crappy JavaME games will suddenly run poorly or incorrectly on the iPhone. I really had hoped we could avoid this. The idea is to revolutionize the expectations and capabilities of mobile devices, not keep churning the same wretched crap. JavaME is one of the most poorly thought out development platforms ever created.
If we must tolerate Java on a device that clearly doesn't need it, let us at least have a complete API, or as close to complete as possible, such as the CDC profile.
For the record, I'm a career Java developer and have written JavaME apps myself. With the capabilities of the iPhone, there is absolutely no good reason to use Java to target it. Objective C is easily a thousand times better language, and the tools provided in Xcode are more advanced than most any Java development toolkit. I understand the draw of compatibility with existing JavaME apps but the fact is, compatibility is the last thing you expect with a midlet, unless you stick to the absolute core, and even then, you rarely hit more than 20% of handsets. That gives whatever implementation they toss together about a 1 in 5 compatibility range, and that excludes apps that decided to rely on screen sizes and render their own interfaces.
That said, one of my favorite mobile apps is a Java ME app, it's simple and adapts well to random devices, so I guess if this does come to fruition, at least I'll get my JABPlite back!