Because the input consists of a combination of the touch screen and the keyboard. By keeping the keyboard compact, it is easier to move your finger to the touch screen and back. A larger keyboard would mean moving your fingers a greater distance to interact with the N900. A compact keyboard allows full input in a way Nokia felt would be ideal. They were not viewing the keyboard in isolation. Rather they were thinking about the entire input experience. I got that from one of the videos... can't remember which one.