You vastly overestimate the number of figs the average user gives about most of the privacy problems that HN grapples with. The average user, after all, uses Facebook. What the average user wants is for shit to just work.
The reason that iOS is a huge market has less to do with that, and more to do with all the other aspects of what makes a good phone.
You argument is also somewhat undermined by the existence of... A rather large amount of crap on the App Store. Somehow, the iPhone has managed to survive.
... Also, cutting side-deals with apps created by billion-dollar players, and telling all other app developers to pound sand (Regardless of the quality of the apps in question) is the main problem we're talking about. Whether or not Apple does this has no bearing on the current quality of the iPhone (But has a lot of bearing on their bottom line), but has a large bearing on the future quality of the iPhone (A vibrant app ecosystem is healthier then one where a few hand-picked winners are rewarded, and their competitors can never compete on an even playing field. At least, that's what advocates of open markets tell me.)