You guys could have avoided this entire conversation by just defining what Apple created as something more than a smartphone. What we call a smartphone today is a rather different than what was meant when the term was first coined.
The first smartphone was pretty much the Nokia Communicator back in the late 90s. It had data connectivity and some limited ability to run applications, and that pretty much what a smartphone was at the time. Today we take it to mean handheld wireless computer that happens to have a phone, but back then if you send a few packets you were a smartphone.
I was hired by RIM in 1999 just before they began work on their first phone and spent a good number years writing RIM proprietary protocol stacks that layered on top of the then new GPRS. Coming from a two-way pager background, RIM decided that phones should have two-way push synchronization of pretty much everything that Exchange provided along with a limited WML browser. The general thought was that phones would never have sufficient power density or radios sufficient bandwidth to allow anything more. That was incredibly predictably wrong, but it's how things went down.
Along with RIM was Ericsson, Palm, Motorola, and Qualcomm. Motorola came from a similar background as RIM and went on to build very similar devices. Both Nokia and Ericsson had come from phones and had decided feature phones should have far more sophisticated PDA functions. Palm started with PDAs then moved to the phones, but adamantly dismissed ideas like wireless synchronization for years making their first attempts at smart phone far more like early Nokia Communicators than early Blackberrys. Oddly enough, though Nokia made the first smartphone, which was followed by two more with RIM and arguably Palm in 20002, it was Ericsson that popularly coined the term in the mid 2000s.
So the point is that all these companies were fighting over what amounts to overgrown PDAs with phones and wireless stacks strapped on. Everyone assumed power density was no where even close to what was needed for general computing, that a full featured browser and heavy duty Internet services were impossible due to bandwidth and latency. Take a look at how our Java expert groups named standards, how people at the time talked about what features smart phones should have, and its clear that no one thought an iPhone was possible. Even Danger, which eventually went on to work on to create Windows Phone 7 and Android, was just working on a better Blackberry.
The iPhone did many amazing things, but what stands out in my mind was how it proved that these assumptions were flat-out wrong beyond any reasonable doubt. Apple pretty gave everyone the finger and said, "Fuck you guys we can build your distant impossible future today."
I left RIM back in 2006 just months before the IPhone launched and I remember talking to friends from RIM and Microsoft about what their teams thought about it at the time. Everyone was utterly shocked. RIM was even in denial the day after the iPhone was announced with all hands meets claiming all manner of weird things about iPhone: it couldn't do what they were demonstrating without an insanely power hungry processor, it must have terrible battery life, etc. Imagine their surprise when they disassembled an iPhone for the first time and found that the phone was battery with a tiny logic board strapped to it. It was ridiculous, it was brilliant.
I really don't think you're giving Apple enough credit here. They did something amazing that many very prominent people in the industry thought was either impossible or at least a decade away, and they did it in a disgustingly short time frame.