New WP theme released for iPhone and Android designed with touch-screen phones in mind:
bravenewcode.com/wptouch
Update: Just installed this theme on underblob. It is actually installed as a plug-in and not as a theme, which makes a lot more sense. The plug-in auto-detects user agent string and spits out the wptouch theme if you are viewing on a mobile device. This way it preserves your existing theme for peeps coming in on their desktop browsers. Pretty clever!