Now, I'm a big anti-apple/open source proponent too, but just having that as a selling point isn't gonna win them a whole lot of users; just look at what happened with the OpenMoko project.
After watching the demo, I think it might've made a decent competitor back when Gingerbread was still fresh, but now I'm not so sure. If there's one thing I do admire about Apple, it's that they seem to really only release stuff that's 'fully baked', even if not everybody agrees with the decisions they make.