It wasn't Apple being totalitarian, it was the music industry in general. All Real had to do to make their stuff work on the iPod was to remove ALL DRM. However, had they done that, they'd have been the ones in the dock at the behest of the RIAA, et. al. Eventually Apple's power and market dominance gave them enough clout to tell the music industry where to stick their DRM. And yes, that sounds "totalitarian", but actually, it was the consumer who benefited.
Seems to me that people just like to use the existence of the meritless case to push and reinforce their own anti-Apple views. Such views may have some validity, but to use this particular case and the history behind it to push them is ridiculous. We consumers enjoy DRM-free music today because of Apple, make no mistake. Do you really think Real (or Amazon, or whoever) would have managed the same thing if Apple hadn't? Nope - we'd still have crappy DRM-encrusted music from the industry or would be using the hit-and-miss GNUTella method.
Remember that any industry-backed music download service had to compete with free (albeit free with strings attached, in the form of terrible rips, mislabelled files and malware). Apple pulled it off, and they deserved to win this.