They could add rails for the arm, like for the guns in Taxi Driver, except you could slide the iPhone up and done your arm. That way you could still reach everything with your thumb.
This suggests an augmented reality approach where the icons are arrayed on a curved 2D surface in front of you, with your iPhone being just a window onto it. Or, heck, why a surface when you could have the whole sphere surrounding you? I'm pretty sure we could pack thousands of icons onto that, and just think of the awe-inspiring demos.