However, twitter isn't about engagement. It's not about communication. It's about broadcasting 1->many
Why does "communication" only count on a 1 to 1 sense? Furthermore how can we possibly jump to the conclusion that just because it's about broadcasting 1 to many, that it is not about engagement? As a service I find it's engagement has a much longer-tail than that of facebook's. Once you've seen all the pictures, added all the obscure acquaintances, and checked all the relationship updates facebook becomes more of a weekly "check to keep up" service than one of daily engagement. Twitter on the other hand is constantly engaging because it's one and only service is to allow people to bring fresh content/media/insight to many people with one update. There's no dilution of which feature i'm going to use now, or which one i'm going to get good at.
As a business decision, giving away access to 3rd party developers seems like favoring short term growth well above profit and the future
Really? If you realized your main product was this successful communication protocol (pg's words, not mine) you would want to limit it's usage to just your own domain? Your value is in the protocol itself, not where it's being used. If I was an investor, worrying why people don't use twitter.com would fall somewhere between "did i leave the coffee maker on this morning?" and "where did i park my car?".