The obstacles can be summed up in one word: Wires. Steve Jobs hates wires. He's right about that. Wires are ugly, inconvenient, and they get tangled up in hairballs. Using turn-by-turn directions for the iPhone will result in a lot of wires running all over the front of your car.
To use turn-by-turn directions in your car, you'd need some kind of earpiece or external speaker. The iPhone's built-in speaker is too weak to use on its own. So that means you need to have one earbud in your ear when driving -- but not two, because that's illegal most places.
Or you need to get a Bluetooth headset, which involves a lot of inconvenient putting on and taking off and charging.
Or you need to find some way to pipe your iPhone audio through the car speakers. That's fine if you have one of the new cars with built-in iPod-iPhone integration. Or maybe your car has a built-in 3.5-mm audio jack -- that's convenient, but it requires another wire. Older cars don't have either; they need some kind of adapter. You can buy adapters that broadcast your iPhone output as a low-power FM signal to be picked up by your car radio, but they only work in rural areas; in the city and suburbs you get radio interference. Cassette adapters work better, but require that your car has a built-in cassette deck, which newer cars don't have.
And the iPhone battery doesn't have enough juice for turn-by-turn directions. The battery is fine if you just want to make a quick location check, which is what you do with your iPhone now. But if you run the GPS constantly, which is what you do for turn-by-turn directions, you'll run the battery down quickly. That means you'll need to plug the iPhone into your car's cigarette lighter for an external power supply.
You'll also need some kind of cradle or stand to hold the iPhone in your car.
So here's what a car trip using the hypothetical iPhone turn-by-turn directions would look like: Get in your car. Put the iPhone into its cradle. Plug one end of the power cord into the iPhone. Plug the other end of the power cord into your cigarette lighter. Connect the iPhone output to an external sound system, either through a hardwire or by putting on your Bluetooth headset and powering it up. Then you're ready to start the iPhone and its turn-by-turn directions app. That's a lot of trouble just to run down to the store to pick up a quart of milk. I'm exhausted just thinking about it, I need to lie down.
I suspect that turn-by-turn directions will require some kind of add-on hardware, a combined cradle/charger/speaker that you'll leave in your car all the time, and drop the iPhone into when you need to use it.
So when can we expect to see all that? Just prior to the launch of the iPhone 3G in June, Reuters reported that TomTom planned to sell turn-by-turn directions software on the iPhone. But when I talked to them a few weeks later, they wouldn't confirm the report. A company spokesperson said they tested the software on the iPhone, and it works well, but, "We will have to look more closely to Apple's strategy before we can say more about what kind of opportunities this will bring us."
The iPhone Blog has some more reasons why the iPhone 3G doesn't support turn-by-turn directions: They cite legal issues, and fear by TomTom and other makers of GPS software that the iPhone would cannibalize sales of dedicated GPS hardware.
So I don't expect to see turn-by-turn directions on the iPhone anytime soon.
In writing this blog post, I'm taking a risk. After all, I'm just speculating here. What if Apple releases the 2.2 software tomorrow, and it supports turn-by-turn directions? Well, then I'll look foolish. But I'd be happy with that outcome -- I'd rather look foolish, and have turn-by-turn directions on the iPhone, than be right and go without. But I don't see much risk in that. My prediction: Don't expect turn-by-turn directions for the iPhone on the current generation of hardware.