You’d be surprised how many Android developers never got the difference between the back button and “up” action. I think this created so much confusion and inconsistencies.
Last time I was an Android user (and, for quite a while and for a couple different spans, an Android developer), that button was a ton of fun for when I wanted to see what random-ass crap the OS or application would decide to do when I pressed it. It was a "press only if you can't find something better to press" button given prime real-estate.
[EDIT] I think the fundamental problem with it is that, if an app screen deliberately presents a back button, there's nearly a 100% chance the current application will handle it in some way that makes sense for the current screen. With an always-on back button, the user has no way of knowing which of three handlers will receive it: 1) The OS, 2) The application, but not handling it in some way that makes sense for the current screen, or 3) The application, handling it sensibly for the current screen. You're rolling the dice.