Competition is good. Readability is certainly making him stepup. I still think ignoring android is a mistake (assuming he continues to do so in the future.). I foresee sharing happening within these read later apps and the size of the network matters.
I don't really know. Assuming that this is a free market, I think the fact that nobody stepped up on Android (with a noticeable success) is probably an indicator of the fact this could not be an error. More seriously (hoping we can have a quiet discussion about differences in market between iOS and Android): Instapaper makes (probably serious) money selling the app. Can you make (serious) money in Android without Ads…
But let's assume that his analysis (as biased as it is) is correct. It still might be a net positive to make an Android version if you consider this. All Android sales are potentially a double sale. Android has a majority market share on phones and iPad has a (overwhelming) majority market share in tablets.
There is a strong chance that the person buying his Android version would also have an iPad. This is pretty obvious when you think about it. Android covers a wide spectrum, with a lot of people on the low end. The people who would be buying his app must represent those on the high end (simply because they'll pay for it), and those people are far more likely to also have an iPad.