"Although the N-Series devices may play the games, they would play them badly."
What you say is only true if you're talking about games that depend on having a nine-way pad. Only if you're talking about games developed for existing consoles. But if you make games with a smartphone's abilities in mind, then they would be able to do very well indeed on modern smartphones.
Something like Snakes got brilliant reviews, probably the best reviews of any N-Gage game, yet the direction controls for Snakes consisted of just left and right. Diagonals simply weren't needed for the game because it had been designed from the ground up for smartphones.
K-Rally has had maybe the best reviews of any recent smartphone game, and it too only needs the player to use left and right, with keypad buttons for acceleration and braking.
Obviously some hardcore gamers will always want games to be controlled by traditional means, but that's what the console world is for. The point about phone gaming is that it's probably going to be a much larger market than console gaming, in the same way that cameraphones sell far more than separate cameras. Separate cameras are still much better, and always will be much better, but only serious photographers bother to buy them any more, and the same thing is likely to happen to gaming. Consoles sell maybe 20 million a year, but mobile phones sell 1000 million a year. Even if just 5% of phone users buy games, that makes the phone game world over twice as large as the console game world.
I honestly don't buy into this idea that games have to be controlled a certain way because they've always been that way. Nintendo didn't buy into this idea either, and look how successful they've become because they tried something new.
When the Nintendo DS came out, a lot of people were sceptical because they felt that games had to rely on direction pads and buttons. But its biggest hits, Nintendogs, Brain Training and Animal Crossing, didn't use the direction pad or buttons at all! The DS is now outselling the PSP by over two to one.
When the Nintendo Wii was announced, a lot of people were sceptical that motion control could ever be anything more than a novelty item. The Wii is now outselling the PS3 and XBox 360 put together.
We get so used to games being one way, we think they can only work that way, and find it hard to imagine games being controlled by any other means. But in truth if a designer is good enough they can make a good game controlled by whatever controllers a system provides. When I did the 5700's review, there's a built-in game called CityBlox which... wait for it... uses ONE BUTTON as its controller. That's it. One button. But it's one of the most addictive phone games I've ever played because it's been designed so well.