Valve has to make the same choices regarding price and hardware tradeoffs.
Yes, but remember, the PC gaming market has already shown a willingness to pay more than twice the cost of a next-gen console for a really kick-ass gaming experience.
The key to Valve's success with its Steam Box, IMO, is to keep in mind that PC gamers are a very different market than console gamers. And, they have more money to spend. If they try to position Steam Box as nothing more than a direct competitor to consoles, they will fail.
I'm already putting together a Steam Box that's going to end up costing about 4 times what a next-gen console goes for. A few more bucks for a groundbreaking controller is not a big deal.
Having said all that, I'm not sure a touchscreen in a controller is a good idea. Maybe just a simple touchpad, but a full-blown touch display would make the controller too delicate for me. My controller takes a fair amount of abuse. And I don't want to have to look at the controller at any time.;