I wouldn't mind something like this but a little bigger, complete with bigger sticks...
My personal wish is for the pack in controller to have no screen. As others have said I want as much money as possible to be spent on the hardware inside the console. They should then make sure that every phone they release, every tablet they make and if possible 3rd party tablets and phones, are all able to interact with the PS4. Send/recieve video/audio/pictures, control it for media a lá the XBMC remote on Android, use them as a trackpad for the PS4 etc.
However, IF I have to have a screen in the pack in controller, then something like this with the changes you suggest would be acceptable. With most of the Vita guts ripped out it would cut the cost a fair amount and with all that space empty they could put in a larger battery to boot. Again, it should be able to send and receive media, remote play ALL games that are playable on the PS4, etc etc. Bigger sticks, work out the triggers, bigger dpad and buttons.
Good god, no. I don't want Sony to not spend like half the cost of the machine into controller instead of the main console. This is so blatant, it's hilarious.
With the bulk of the Vita innards ripped out (no need for a quad core cpu/gpu, memory card slot, game cart slot, rear touch) it would drop the cost a fair amount and they don't even have to use the Vita screen if they didn't want to.
It would still be a more expensive controller than I'd like, but I can see the advantages of it for being able to use the screen to navigate the PS4 OS, controlling media, remote play of games etc.
What in my opinion would be a silly mistake would be putting in a tiny ass screen. Go 4-5" or don't bother.
That's like £25, lol not gonna happen. The PS3 controller is still over £30 over here.
And they are making bank off it. Using how much the DS3 costs to us as an indicator of how much a screen based DS4 might cost Sony to pack in isn't going to get us close. They could then charge a fortune for second ones and keep selling the DS3.