Apple illustrated the idea with discussion of a USB port and SD card reader, showing how the card reader and USB port could be integrated, but the port could house other interconnects.
The summary is misleading in so many ways. This is just adding USB to a multi-card reader.
You clearly did not read the letter from jobs. He does discuss the proprietary nature of iPhone OS. But he also covers why it would be bad for apple users to have middleware design tools become popular -- based on their past experience.
It's also worth noting that you can create amazing, open mobile web apps that work great on iPhones and iPads and many other devices. You can thank apple's open source work on WebKit for a big part of that.
Combined with the performance issues, crashing issues, and lack of a good touch interface for Flash, what argument can really be made in favor of it on mobile devices?
Write it in HTML5, JavaScript and CSS and move on with your life.
When bad men combine, the good must associate; else they will fall one by one, an unpitied sacrifice in a contemptible struggle. - Edmund Burke