Dropbox fixes app rejection issue, complies with Apple's rules
appleinsider.com
appleinsider.com
When mixing OAuth and native applications written by non-nefarious parties, the only entity you're preventing from reading the user's password is the user themselves.
However, if a nefarious party writes a native app, they can easily acquire the password even if you do use OAuth.
It's a case of bad UX being pushed on users due to fundamental cultural misunderstandings between the web teams declaring authentication requirements, and the native developers who want to provide the best UI.
Twitter is absolutely doing this correctly by providing xAuth for use by native applications.
I think the term you were searching for is "phone tag," where two parties repeatedly miss eachother with phone calls and instead communicate through phone messages.