I don't think it was Google's intention to sell a lot of Nexus One units. I believe that they wanted to set a standard for Android phones over which other manufacturers could improve. Android phones before Nexus One were not good enough and they wanted to tell people that this is how an Android phone should be.
This. Google never wanted to try to cut out the middle-men. Google didn't want to push the phone too much. They just wanted to put it out there to be able to let them know, "Here, look, this is what you can do with this technology at this price point." As was pointed out at http://news.ycombinator.com/item?id=1529657 , Google achieved its aims. The Nexus One was a success. It can go away now. If you pay attention, yo…
Google is betting that they benefit more from a lot of competitive browsers, than from having an iron grip on a single browser. Conversely, they can't allow someone else with an iron grip to hold the browser market back to benefit themselves. The same is true of the phone market.