I am in agreement with most of the things you are saying. However, I think I understand Microsoft’s plan, to put it in to your words, why they “dumbed it down.†I think it is an old fashion if you can’t beat them you might as well joint them. If fun and games are selling, then you might as well provide it. I was a long time WinMo users also and I use to look at the iPhone as a passing fad and not a phone for a power user. I switch to Android because WinMo was loosing its luster and Android phones where cheaper. Now an Android phone can cost as much or more than an iPhone but that is another issue.
I still don’t have an iPhone or I don’t know if I ever will, because I was waiting on the iPhone to go to Verizon. But when I purchased an iPod touch 3G and the iPad, now I see why iPhone sales are so high. The iPhone has evolved by leaps and bounds from the first generation. There have been many improvements to the iPhone such as more power, copy and paste and multi-tasking with a long battery life. However, it’s not the hardware, the software, or the network. It’s the environment that Apple has created with iTunes that has captivated the masses. The iPhone has the most interaction with business and entertainment than any piece of electronics on the market. Microsoft is trying to match it with the Xbox live integration and the music with Zune. That’s an environment that Apple started in the game room and not the board room where Microsoft was king. Now, Apple is finding its way in the board room also. With an iPhone you call it “dumbed it down†as I use to also, but the true term should be “simplifying,†so a power user can get more things done or be more creative and less time using the technology. I can spend more time reading my e-mails and less time trying to access it. If I download an app I just have to decide if I like it or not, instead of if it will work on my device. I can make a presentation without hundreds of pounds of expensive equipment to carry. I think because of sophisticated web apps there is a less need for cut and paste. Maybe that is why Microsoft left it out. Since I left WinMo 5 I have not needed to use cut and paste on Android or iOS. Microsoft has the technical know how and the money to master all the above and be what Apple is today. It is not a bad strategy.
As you noted, there are several phones out there with better hardware, software, and on a better network but iPhone still manages to out sell most of them because of the simplified way Apple has brought our digital lives together all in one package with the iTunes environment. I open iTunes more than I open Internet Explorer. But I have to agree with you that it is not going to work for Microsoft. Not because they have a bad business plan but Apple is just too dug in to be beat. Now Apple is trying to go after Facebook with this Ping. I think Microsoft have to attack from another front like do more with that Sync thing that they have in Fords. They need to hurry because iOS is slowly being intergraded in cars.