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Wouldn't the plug trigger the hardware audio switch (assuming the iPhone has one) and permanently mute the phone? Would a plastic plug instead of an aluminium plug solve that?

Maybe I'm overthinking this.

You are definitely over thinking this. It's a joke.
I know it's a parody, but if someone actually made this, I bet they'd make money!
I backed the Pressy, and actually used it for a couple weeks when I got it. It would have been useful, even with the ridiculous DRM, if their app didn't cause it to take 5 seconds to recognize that the button had been pressed.

Basically, they made a cool product, and ruined it by hiring (or being) crappy developers.

We have something similar in Japan (and probably other places) - something that fits in the earphone plug and has a decorative end (a character or something shiny for girls, etc...). They act as dust protectors as well.
This is genius. More proof that Apple is the greatest innovator in the world.