Guys finally am publishing the template. Extremely sorry for being late. Some personal reasons. Anyways better late then never.
Also i have made some visual changes. I have added a background gradiant. If you dont like you can remove it. Steps given below on how to remove it.
Also i was not able to test the site on a iPod touch. If anyone can try and give a review it will be great.

You can edit this template at your wish. I dont have problem but don’t remove the backlink from the footer. It should not be edited. For doubts email me anytime.

I did some personal testing just to make sure the template is as light as possible.

Tested with a normal Page with lots of text and hyper links.

Total Size: 130KB
Total Requests: 18
Total HTML Size: 10KB
Total CSS Size: 3KB
Total JS Size: 116KB
Total Image Size: 2KB

Loading time on a 256Kbps connection is ~4.2 Sec

1) Always remember the iPhone screen size while psoting. If you are posting images resize it properly else you will mess it.

Setup steps for BTI.

1) Take a backup of your existing template before proceding.
2) Go to Settings –> Layout –> Edit HTML –> Upload the BTI template.
3) Login to blogger using the following url: http://draft.blogger.com
4) Go to Settings –> Formatting. Show 1 Post.
5) Go to Settings –> Comments.Comment Form Placement: Embedded below post
6) Go to Settings –> Comments. Show word verification for comments?: No. Though this is your personal choice as Word Verification will be a pain to do on iPhone

Save your settings.
5) Go to Layout –> Page Element. Edit Blog Posts settings. Enable Show Star Ratings. Again this is your personal choice.
Save your settings.

6) This setting makes the site open only on iPhone.
Go to Layout –> Edit Html. Search for
var browserchecking=
and Set True for iPhone Browser only and False to work on all browser.
By default its set to True.

7) Changing the background. Again personal choice.
Search for
/* Background change*/
background:transparent url(http://img26.imageshack.us/img26/5153/bkground.png) repeat-x scroll 0 0;
and replace background with something like this
background = “ffffff”

Next upcoming features: (New updates will just be a template replacement so no need to panic. Your data will stay )
1) Search
2) Special blocks for mobile Ads
3)Tag cloud (In case it doesnot makes it heavy)

Suggestion are always welcome.

Link to download: http://www.mediafire.com/?sharekey=5e2c14ce499ad50061d4646c62b381cb3a995189d6614152c95965eaa7bc68bc

or
http://snipurl.com/fpd4t
Demo Link: http://templateforiphone.blogspot.com (Works only on iPhone/iPhone 3G/iPod touch)

All the Best! And ya do post us which site you made. I will be more than happy to look at it.

Blogger, IPhone Blogger, IPhone