What you're describing is how my very first cellphone (a Sony PCS phone, model CM-B1201SPR) operated. It was awesome, and I distinctly remember the mini-grieving I did when I replaced that phone with a Nokia. Snake was cool, but I missed that jog wheel!
And yeah, imagining it already feels right to me as well. I just picked up my iPhone and imagined how cool it would be if Apple took their digital crown, flipped it sideways, and submerged it into the edge of the phone. Sure, waterproofing might be tricky, but they figure that out for other penetrations through the case, so I have faith.
