Earlier quoted context omitted.
> I think we are close to the tipping point where a majority of developers begin to favor webapps to iOS native apps Isn't this pretty much what Apple wanted in the first place?
No. It just meant that they did not have the native application development SDK and the associated App Store infrastructure ready that time. Saying "who needs native apps when there is the Web" up until releasing the native App Store is typical of Apple - "who wants to watch video on small screen", "People don't read anymore" etc. come to mind.
But my email was full of guidelines to create web apps for the phone. What I think happened is that (at that time) Apple wanted Mac developers to make iphone apps, badly. And mac dev's wanted to do it natively. A half a year later, I see the beta of the dev kit.
I doubt Apple imagined the app store market at that time. And like most grand success stories, there was a lot of luck involved.