But... I guess the problem might not be self-evident for somebody who has not done designs on this area, but what exactly would you control with the d-pad?

You're talking for instance about navigating in menus. That assumes that there is a focus element on screen. Look at the iPhone UI, for instance. There is no focus element there. For a proper touch UI, you shouldn't have a focus element.

A traditional UI style is to have focus elements and then means to move this focus element around; first click to move the focus to position on screen, second click to confirm. Another style is to have no focus on lists and menus: first click always selects whatever you click. But you can't really mix these styles together very well. The current S60 touch UI does this, and I'm not sure that people are very pleased with the results. (Blackberry Storm tries to do this half-child of pressing lightly focusing and pressing heavily activating, but that's slightly hackish.)

There are major implications to whether you have an UI that supports a focus element or then not. Take an example... for instance, of a file manager style application: content list on screen, toolbar on screen. If you have a focus, you can click on an element and then choose a command from the toolbar. If you have no focus, then you cannot do UI's like that, but must set the commands differently. Or take another example from the S60 UI designs. They have the Options menu for commands for the focused item. It's essentially the same as the toolbar: the first click cannot activate an item, because the user must be able to click once to select item, then press Options to get commands for the focused item. It makes good sense for HW keys, but not really for touch screens.

The more you try to stick on to hard key based navigation, the less you can optimize for touch UI's. It's really that simple, fortunately or unfortunately.