The latest version of MameCE has incorporated a hack made by one of the guys over on the PPCThoughts forum to allow button remapping, which is a workaround for the button issue.
However, many games (such as the Capcom releases) don't work, and that is a definite problem, as mentioned above.
To return to the topic, the screen's 12-bit nature is only really noticeable when looking at photos - it's fine for games. And in fact, for everything else, it's one of the nicest screens I've used. ClearType looks amazing. Obviously, it's not transflective, but you can't have everything: 64MB RAM, SDIO, Bluetooth...
You should also be aware that there are only two backlight settings: on and off. Not a problem for me, but it may be for you.
I'll stop rambling now.