Frankly, I'm not certain that the part saying that applications developed using Apple Software may not be distributed outside the App Store is even enforceable. Where do you draw the line - if you loaded your work-in-progress on a development iPhone? what if you didn't, but used XCode as a text editor? does it kick in if you used the autocomplete feature? It all seems quite silly from a certain perspective - imagine the New York Times selling a typewriter and saying that they had right of refusal for anything you wrote with it.
It doesn't need to be legally enforceable, they can just kick you out of the iphone developer program, and you have little recourse.
I doubt they mean just using xcode, or no one would be able to distribute Macintosh apps. Linking against Apple's iPhone header files would be a clear violation, though.
See, that's what I thought at first. But then I the text would talk about code "using Apple APIs", not "developed using Apple software".