It'd probably be greatly improved if there were an option to make the chords toggle for each press of the d-pad instead of making you hold them down. As it is, it kills the sound as soon as you release the d-pad, which makes maintaining a rhythm kind of a bitch when you're playing the pre-programmed songs and it jumps from a chord mapped to d-pad left to one mapped to d-pad right, or a diagonal. Maybe it's not so bad on a DS Lite, but on a standard it's a massive pain.
It's also got a pretty terrible selection of songs that they programmed in. I realize they were limited by the fact that they could only use songs that you can play a reasonable approximation of with just chords (more on that coming), but seriously, Avril Lavigne?
On the subject of only chords: Is there any really good reason they couldn't have instituted a string specific plucking mode? Add five more lines on the touchscreen, and have a little tag on each that changes to reflect what note each string will play with the selected chord, and you're done. Almost fully functional pocket sized guitar thingy.
As it is, if you've got an exceptionally quick thumb, you can pull of a passable impression of a self taught acoustic wanker, with none of the built in sex appeal of actually having a guitar in your hand.