The news comes from Eldar Murtazin, a Russian blogger who has had a track record of breaking big news, namely that Nokia and Microsoft were making the deal for Nokia to exclusively use WP7. This time, Eldar is saying that with the WP7 Mango update, manufacturers will no longer be required to have physical function buttons on the front of a device.
This seems like an odd move by Microsoft, because physical buttons cause far fewer accidental presses than virtual buttons. It's also strange because the move to virtual buttons was a necessity for Google, because manufacturers couldn't agree on what order the menu, home, back and search buttons should be placed (or even if there would be a search button), so virtual buttons make a more unified experience for users. Microsoft already had hardware requirements in place so all phones have the same back, Windows, and search buttons in the same places.
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