Google Translate adds iPhone support but lacks Arabic support
Google’s Translate service now added support for the iPhone, when visiting the site from an iPhone or iPod Touch you will have access to a version of the site optimized for the iPhone/iPod Touch interface. The Arabic however is not as it is supposed to be.

Since the iPhone/iPod Touch 2.0.1 lacks Arabic support the Arabic letters will appear unconnected and useless. And the Google Translate page doesn’t even offer the option to switch the interface language. Macworld also noted this:
the iPhone still does not correctly display Arabic script (it displays letters individually, without the connecting ligatures, which effectively makes it gibberish). This isn’t a fault of Google, of course; it’s a problem with the iPhone’s version of Safari (similar problems had existed in the OS X version of Safari, but seem to have finally been ironed out).
But the current iPhone Arabic display problem is system wide. The iPhone currently have no Arabic support as of iPhone 2.0.1 software.
Via Macworld

See for this page ..
http://blog.milyani.com/2008/07/12/2159/
The iPhone will support Arabic characters, but sporadic .. I think that when sold in the Middle East, they settle this problem ..
iPod touch is being sold in the middle east, that’s a good reason to support Arabic