This game is super-smooth. Very very nice. I see what you mean about difficult though, I had problems even finishing the tutorial levels! (had to restart from the beginning at one point after running out of live - is that kind of a bug?)
I do have a couple of suggestions, feel free to take them or leave them.
Firstly, when I play games on my iPod Touch (and I assume this would be more true for people with iPhone's), it is for a generally quick blast to fill some time. With that in mind, I do wonder if it would be more suitable (especially for a casual gamer) if you could just continue where you left off. Having to start from the beginning each time I play is... a bit annoying. I don't see Quak as a retro-game - it looks like new, and so to have to restart each time was "surprising" if you know what I mean. This is especially for a multi-function device where I might want to check my email, then continue playing.
The other thing, really minor, is that my fingers (being used to other iPhone games) assumed the buttons were closer together, and it too a while to train them to move them further apart to hit the buttons. I tend to "roll" my thumbs in these games to hit the adjacent button, but that is harder to do in Qwak.
Anyway, these are fairly minor things, and the game is otherwise very pleasing to play. Great work!
P.S. I really hate those falling spikey balls!! It goes against the completionist in me to have to escape and miss all that fruit
I guess it would be a big change to the point of the game to change them or the timing though (i.e. this is not an RFC).