Sorry for the late reply
Yes, the touch screen has Linux support. We have the driver for it.
Yes, capacitive touch panel can make it flat like iPhone4, but the cost will be much high and it will have glossy surface, which is not good for in-car or out door use
Now our major consider is keep the price low and provide better screen performance. Like better color and can be use under sun light. Since it is design for camera extend screen and Car-PC.