I think Nintendo would lose some sales because app prices are so affordable. A vast majority of people have iPhones, if they can get games from all the top game developers why would they ever have to buy a portable console again?
Unless they make exclusive games for the iPhone, that you can't get on their consoles. Then everything would be good. You get exclusive games, that aren't as intensive as the games on a DS.
i.e. Mario Party Touch would be pretty cool. Now that the new 3.0 upgrade will allow Peer 2 Peer connectivity. A group of friends with iPhones/iPod Touches could play multiplayer.
So let me know in your comments below! Should Nintendo, or other big game companies who sell handhelds, make games for the iPhone?