Either way security problems will exist and pretending that their app auditing is anything more than a justification for a walled garden is simply burying your head in the sand.
The walled garden is probably one reason for the approval process, but it's certainly not the only one. Apple seem genuinely motivated to use it to raise the quality of the end-user experience.
Here's one example: a few years ago, developers were complaining that Apple was rejecting their apps for having an icon of a phone in their app. It didn't make sense - why would Apple object to that? It wasn't an icon depicting a competing phone. It wasn't infringing on their trademarks or copyrights. People couldn't figure it out.
Then, a short while after, the iPad was released, which could run iPhone apps too. Suddenly, that restriction made sense. Apple wanted the designs to make sense for people using iPads as well. Is it a bit of a control-freak thing to do? Sure. But there's no reason to do stuff like that unless it's to improve the end-user experience.
Here's another example: Using undocumented APIs. A lot of people point to this as evidence that Apple are hobbling apps, artificially limiting their functionality. But any developer will tell you that people using non-public APIs is a nightmare for forwards compatibility. As soon as there's applications in the wild using an API, you'll have to make the choice between supporting it, unchanged, for eternity, or breaking things for users. Ask Microsoft- they've still got a tonne of backwards compatibility code in Windows because sometime in the early 90s, applications rooted out private APIs and depended on them to function.
How about another example: I've had an application rejected for giving a misleading error message. If somebody was trying to log in and their Internet connection wasn't up, it told them their username and password was wrong instead of telling them to check their connection. A dumb bug, but one that could confuse end users.
It doesn't really make sense for Apple to invest in this approval process, and piss off developers, and slow the whole thing down to a crawl if this is just a pretext for having a walled garden. Apple aren't shy about being control freaks. If it was just about being a walled garden, they'd say so, they are shameless about it.
Sometimes the simplest explanation is the right one - Apple have an approval process that rejects applications on quality and UX grounds because they want to ensure the quality of applications on the App Store. They might also have other motivations as well, but there's no reason to believe that that one is anything other than genuine.