Seems like this was pretty doomed from the get-go. Right off the bat the entire internet would be broken on these phones, as I doubt any websites are designed to handle a ~100px wide viewport. Even designing sites for 320px viewports of the iphone4 is massively challenging and not well implemented by many. Not sure how they planned on handling that.
It's not _that_ hard, as long as you don't try to do things that nobody ever wanted in the first place, like floating Google and Facebook buttons on the left hand side of the page.
I would argue that they were thinking you wouldn't really need to use the web browser that much. The idea would be do whatever it is you need to do and get out.
I suppose! But I do imagine having to occasionally load something up on the web and having most sites being totally broken. They must have had some plan on how to handle--I'd be curious to know because I can't think of anything.
Or.. maybe there were so many insurmountable problems like this which caused them to shutter the project.