Fusion Garage's story is infinitely more believable than Arrington's. After both sides have spoken, I imagine it went down like this:
They show him their OS in hopes of getting press and subsequent funding. Arrington loves the idea and wants in on the concept. Fusion Garage goes and actually builds the thing. Meetings take place with Fusion Garage probably passively hoping for funding through Arrington's connections and Arrington monopolizing the conversation with "product ideas" that are more pie-in-the-sky thinking than actual engineering.
In the meantime, tablet fever grips the nation and a Fusion Garage with a working prototype has no trouble scoring VC meetings. They probably had to fight off the cash being thrown at them. Suddenly they don't need Arrington and those that actually came through with funding demand they end the charade of him being a participant. All they have to do is come up with a new name (Joojoo? Come on...)
What remains to be seen is how TC's audience will react. The idea that Arrington apparently tried to glom onto the project with no engineering contributions perfectly fits the tropes discussed on HN: MBA-types make a buck off the back of those who actually built the thing. I wonder if this tale will actually hurt his rep?
Who here will approach TC and Arrington differently after today?