1. The market does decide. There's Android, Palm, Blackberry, and Zune (rebranded as Windows for some reason) to provide options. Vote with your wallet.
2. I have worked in Retail. Retails stores choose their products very carefully. What you carry is part of your brand. Sure Apple is the store and not the app, but they're still a store closely associated with their brand-sensitive product and thus they behave like a company carefully managing their brand.
Ok, have at it. But before you waste me with lectures about how Apple has some sort of moral obligation to lose money or why they're idiots for not doing the smart thing, please try to think of them as being an "opinionated" hardware manufacturer that is so opinionated they make their own OS.