Sure. Why not? There's handhelds for all those fancy games with their graphics and tapping and analog nub control schemes, so why not engineer one so you can play Dwarf Fortress on the bus. It's a question Florian & Rob are asking over at Boing-Boing - complete with fancy mockups - and it's one an adventurous maker of small, handheld computing devices could do well to ask themselves. Provided you could trick them into thinking the market for one would be bigger than it actually is.
Who'd like a portable text game console? [Boing-Boing]