Dan,
I agree with your basic conclusion: the heat one feels when using a cell phone or handheld transceiver is due to the fact that much of the energy being consumed isn't being converted into RF. It's hard to make a transmitter that converts more than 30-40% of the energy consumed into RF, and efficiencies as poor as 10% or so aren't unusual.
But I did want to make a gentle technical correction. Your message suggests that there's very little absorption in the 2M (144-148 MHz) band used by your HT; this is actually incorrect.
Heating from RF is can be quantified by the specific absorption rate (SAR) of the body being heated when exposed to RF. As the name suggests, it's the amount of RF that gets absorbed by tissue in the body (which results in heating). It's usually measured in watts per kilogram.
It actually takes LESS power at VHF frequencies (like 2 meters) to reach a given SAR than it does at UHF, microwave, or HF. It's a result of resonance effects as the wavelength approaches the size of the human body.
Take a look at the FCC's OET Bulletin 65, which specifies the power levels at which you have to undertake an RF safety review of your amateur station. These power levels are derived from the amount of energy at a given frequency required to achieve a specific SAR. Note that for VHF, just 50 watts is enough to trigger the requirement. At HF frequencies, the levels are often much higher (500 watts for the 40M band, for example). In the 13cm band (2.4 GHz), you need to be operating at 250 watts or above before the FCC feels you need to do a routine evaluation for RF safety.
Greg Lapin, N9GL, has written about this fairly extensively on the ARRL Web site if you (or anyone else) are interested in learning more.
Once again, I'm not challenging your conclusion that most of the heat from holding a phone or radio transmitter is simply waste heat. And I'm certainly not asserting that there's any danger in using a cell phone or HT. But I thought you might be interested to know that the body actually is heated MORE by a given power level in the VHF range than it is by the frequencies used by cell phones.
Phil