They didn't sell out. The PPC was dead. Could not go faster without heat problems and Apple got tired of promises and waiting for the impossible. Intel, and their faster and more energy efficient processor was a natural way to go. Yes, it ticked off Apple purist but Motorola could not deliver the goods.

Apple will fix the iPhone as they usually do with their products. There is also a reason for keeping the iPod priority. If it had been open source, I do not think it would have gotten very far along. They could however open things up for development and then certify applications as "for Ipod" or whatever.