And yet the most major popular MP3 player on the market can't play FLAC, which will probably mean it will remain as obscure as it is now (i.e., mostly used among audiophiles).
So, store your music in flac and convert as needed.
That would definitely be better, but the fact is that they can't (reasonably) re-write all of the previous iDevice firmwares to support FLAC, so open sourcing ALAC benefits all of the users with those devices. If open source codecs is the route Apple is going down, then perhaps they will ad support for FLAC to new versions of iOS, but for everyone not using those versions, this would still help. Throwing weight behind FLAC is good, just throwing weight behind FLAC is slightly less good. All that said, using lossless codecs on an iPod, like you said, is a bit overkill.
What I think would really be nice is if Apple would open source the music database on the iPod -- not being able to load an iPod from Linux/not iTunes (easily) is much more of an issue for me than support for a lossless codec.
FLAC is honestly one of the happier OSS success stories.
A decade later, many developers are still supporting IE6's peculiar dialect of HTML. And a few are still supporting IE5's even more peculiar dialect.