I kind of like it as a machine I'd keep in the living room near the TV for quick use or something. Right now I use my iphone and its just fine, and a bigger screen never hurt.
Apple does have machines at the apple store with the 3 buttons in the middle of the screen for genius appointments or something, they could probably leverage that for the buttons on the side, so it wouldn't need a new OSX or anything, though it would be more likely if the macbook nano ran iphone osx (or rather ipod touch)