The lack of tactile feedback *is* the problem. No virtual d-pad game that requires fast reflexes has ever worked. Not to mention six buttons on the screen would take up more than half of it.
i don't think a street fighter port would suffer from touch screen D-pad controls any less than other games such as real soccer, funky punch, etc...who all have combinations and special moves with the controls, and even with those i have to constantly look at the touch screen D-pad to see where the hell my fingers are and if they are actually on the D-pad, it does get annoying but hey, it's the price we pay for having a touch screen phone, and after a while you naturally know where's what.
now is that a reason not to have these kind of games on the iphone? most definitley not, they are still playable and alot of fun as i'm sure we'll all agree.
I think a SF2 port would work, the controls would obviously have to be adjusted and compromised for use with the iphone, so instead of 6 buttons, maybe 4 buttons, 2 slightly larger than than the other 2. so
medium punch and kick, and slightly larger
hard punch and kick. and the D-pad would be like any other in the bottom left corner.
ofcourse it won't better the experience one would have with a real D-pad, but it doesn't mean the game won't be a success, it just means it would take a couple of days to get used to a touch screen D-pad interface.
i'm sure a SF2 version on the iphone would be alot of fun, combine that with multiplayer functions and thats a whole other bag of fun waiting to be had.
i'm just being optimistic about this, i really think it can be done and iphone users in general would really enjoy this game in their pocket. hopefully if it ever comes to fruition, the devs will release one of the newer versions of SF, maybe SF Alpha or something, since the original SF2 is now very old and kinda boring compared to the newer versions with more characters, special moves, etc.