This whole rumor was probably triggered by the fact that iOS 4.3 beta 1 for iPad comes with multitouch gesture controls for changing applications (by swiping multiple fingers horizontally, like on the Mac for changing pages), returning to home screen (by the 5-finger pinch), etc. These gestures definitely will be familiar to current Mac users who already have similar multitouch gestures, and will no doubt will work on the big and nice 9.7-inch iPad screen.
I’m not so sure about the iPhone though. If it loses it’s only home button, how are you going easily and speedily work your iPhone singlehandedly? Imagine this scenario, which no doubt will be familiar to many; I’m eating lunch, my iPhone vibrates, I wiped it out from my pocket using my right hand, reply to the SMS using only my right hand for typing, then I double click the home button to change apps to Mail and check my email, on my right hand. All these while holding on to that piece of fried chicken wing. ‘

Some might say that problem can be solved by having a non physical Home Button built into the iOS interface, but that’s bullcrap. Apple won’t do such a thing and it will look too much like the dysfunctional Android interface with stupid button placements all over, screwing up the ease of use.

I won’t be surprized to see the iPad lose the Home Button though, that button always felt awkward to use on a big screen like that. But it feels almost natural on the small iPhone screen. Probably that’s exactly why there aren’t similar multitouch gestures for the iPhone version of the iOS 4.3 beta 1.

The iPhone will be keeping its button for at least quite a while more. Until Apple redesigns the whole iOS interface.