Second, the keyboard isn't ridiculous. It's actually quite powerful. He took a screenshot of the Chinese – Simplified (Handwriting) keyboard, which allows users to draw characters in the blank area. I hear it's an incredibly popular input method in China. Of course, the iPhone offers 6 other Chinese input methods, ranging from traditional keyboards to the drawing methods.
There are also different phonetic systems, like Zhuyin/bopomofo. Some of these are taught in the educational systems and used as computer input method.
Apple choosing to support only one of these would be far more drastic than forcing all Latin alphabet languages to use the same layout. There could also likely be political ramifications, as traditional and simplified are the subjects of significant debate. [ http://en.wikipedia.org/wiki/Debate_on_traditional_and_simpl... ]
It turns out that, with over a billion people and dozens of dialects, many different writing styles, and a long history of different electronic input methods, Chinese speakers really do need multiple different ways of inputing Chinese.