I posted a link to that story because it fills in additional details about the original approval of C64.
You are certainly right that Apple doesn't want iPhone apps or components being sold outside the App Store. The obvious reason is so that it can take a 30% cut of all software being sold for its platform (just like game console makers do, although their cut is much larger). But the linked article also points out other reasons why Apple is working to maintain control over the iPhone's apps.
For starters, it means that malware for the iPhone will be really hard to create and viruses will be even harder. If an app goes berserk, Apple can revoke its certificate to stop it dead. It also prevents shovelware from making the iPhone software market look like a dump. Go browse a WiMo or Symbian store. Most of their apps look as bad as DOS-era software. Apple is pretty strict about not just looks, but style, preventing nagware and begging. Apple even canned an entire developer of shovelware, banning something like 800 garbage apps from the App Store because many of them were appropriating unauthorized data, just like SEO trashmen who steal content and put up fake blogs paid for by Google.
Google thinks there is no trash beneath their ads, which is why it naively opens its arms to developers in Android. I claimed some time ago this would be a problem for Android (once it gets going), and I still think I'll be right. Nobody is agreeing yet.
Google's Android Market Guarantees Problems for Users
Apple also doesn't want to allow Flash/Silverlight/Java to take over its mobile platform and compete against Cocoa on the iPhone. This is more controversial, but is related to the "we don't want your insecure junkware tainting our platform" motivation. Most of the vulnerabilities reported for Mac OS X are actually flaws in Flash and Java. Apple doesn't want to maintain the same effort on the iPhone, and currently it doesn't have to.
In June 2007, I was the first to say Apple clearly didn't want Flash or Java on the iPhone, at a time when everyone was assuring us that Adobe would deliver Flash for the iPhone by the end of 2007. They were wrong. Apple clearly does not want Flash, and was only telling pundits just enough to keep them pacified.
Gone in a Flash: More on Apple's iPhone Web Plans
In this case, Apple isn't worried about C64 creating a BASIC platform that rivals Cocoa. Instead, it's mostly worried that an exposed BASIC interpreter could be used to distribute unauthorized "ROMs," potentially exposing Apple to copyright claims, or to open some can of worms about viruses or "malware" that might be used to suggest the iPhone had security problems. You know Wired would jizz itself over C64 BASIC malware running on the iPhone, using headlines that again equated it to Windows 95, as it did at the iPhone's launch.
Kim Zetter and the iPhone Root Security Myth
When you judge Apple, don't forget that the company swims in a tank of piranhas.