An Esplora makes a good controller. With an Adafruit 1.8" display, [u]it makes a great self-contained device[/u].
R0D0T published a great game based on his Arduino platform at http://arduino.cc/forum/index.php/topic,119099.0.html - see that post for his blog and Hackaday post which has full details.
This weekend, I took his great work and code and modified it slightly to work on the Esplora+Display combo. I also add a 5 volt battery to make it truly handheld and portable.
You can see it in action and learn to make your own at http://21stdigitalhome.blogspot.com/2013/01/first-self-contained-arduino-esplora.html.
My huge thanks to R0D0T for his permission to use the code. I'm really happy to help get some real games and other apps to such a platform. Maybe perhaps we can nudge R0D0T to publish his more complex Snake game?
You can also get the code for the Esplora on Github at https://github.com/TheKitty/EsploraApps. And get out there and code some great apps and share them on the forum.