The intelligence community (cough, NSA) has in all likelihood already compromised iOS (and Android, and BlackBerry, Windows, you name it.) Unfortunately for the FBI, the NSA (reasonably) doesn't want to burn its sources and methods by having them disclosed in open court. Their assistance, in a case against "US persons" would also constitute a rather obvious violation of Executive Order 12333. Sure, the NSA flouts EO 12333 everyday and twice on Sunday's, but it's not being discussed in an open court. Defense attorneys would have a field day with "fruit of a poisoned tree" arguments.
The FBI is looking for something that is disclosable in open court, and that will withstand defense scrutiny. Success in this case sets the precedent that Apple (or any other hardware/software vendor) can be compelled, via the All Writs Act, to circumvent any security features they've built into their devices. Every DA with a phone in their evidence locker is going to come out of the woodwork to get those phones unlocked. The FBI gets their evidence, and whatever juicy exploits NSA has stay safely out of public view.
Beyond that, though the original court order gave Apple the option (which they would almost certainly exercise) to have physical custody of the subject phone to install the GovtOS, it also specified that, if Apple exercised this option, they would host a computer, provided by the FBI, that would be connected to the subject phone. The FBI would then remotely operate said device, connected to the subject phone, for the purpose of carrying out the brute-force PIN attack.
Much ado has been made of how the GovtOS software image would circumvent the device wipe, cooldown and direct PIN entry features of the lock screen, to allow remote PIN entry from a connected, FBI computer. Though not specified in the order, logically, Apple would need to remove the "Trust this computer" protective feature, so the phone would give the FBI 'puter the time of day. Then they connect it to the phone. At which point the FBI will be in a position to pwn the phone, and download the software image from the phone.
TL;DR: Totally NOT Orwellian fantasy!