As John Gruber stated, the real reason behind the band is to prevent someone from establishing cross platform development tools that will trivialize the choice between getting an iphone and another phone/OS.
What's to stop a tool developer producing an Objective C library and compiler that can target both iPhone and Android? The original source would still be in Objective C. If it was developed specifically for the iPhone, and only later for Android, it wouldn't be a compatibility layer - only the Android port would count as the compatibility layer, with the iPhone original being the native one.
So let's all hope Android (or any other mobile platform) is very successful. Yes, you iPhone-Developers, too should wish for Androids success!
I think Apple isn't used to being in control. Cross platform on OSX generally means poor versions of programs designed for other platforms. That isn't an inherent factor of cross platform tools, its because OSX is a minority OS. For instance in all the complaints about Firefox on OSX noone has stopped to think that Firefox on Windows is equally developed on a compatibility layer.
With the iPhone OS dominance in handheld software compatibility layers, Android and other platforms will be the minorities dealing with poor ports. Cross platform tools will be designed for iPhone OS.
Having said all I've said against section 3.1.1, I'd have to say I support banning Flash CS5 from the App Store, there is just no need to blanket ban compatibility layers. Maybe Apple should institute a framework whitelist - it'd certainly be up their alley in terms of control, and would let decent platforms like Unity continue.
It may also be worth nothing that the particular case of Lua was already prohibited under the iPhone DPLA section 3.3.2 which states that no interpreted code may be included unless it's run by Apple's interpreter(s). Wax embeds a third-party Lua runtime that does just that.
That said, there was talk about moving Wax to llvm-lua such that the resulting application would be compiled machine code. The new clause precludes this option entirely.
The only uncertainty left, now, centers around enforcement. There are a number of PhoneGap and Wax powered apps already in the store, and PhoneGap was even blessed as an approved framework. Only time will tell if that blessing stands.