Nobody is talking about bytecode conversion at run-time - the conversion happens when the applications are compiled.

I really doubt that - creating a Java compatible language compiler that keeps pace with each new version of Java would be a serious undertaking and one that is completely unnecessary when you can just convert the bytecode.

And since being able to convert the bytecode is a necessary requirement in order to assist with the porting of native Java classes to Dalvik it makes no sense to go down the language compiler route when instead you can just convert the bytecode at the end of the compilation process. There really is no need to re-invent the wheel.

Seemingly anyone who creates an app for Android that runs in the Dalvik VM would end up using the dx tool during the creating of their application. This would mean Google, device manufacturers, third-party developers all use the dx tool.

If that were true it would open Google up to all sorts of accusations from their partners since the playing field would no longer be level. All Android developers should have access to the same SDK and development tools, I'm sure the partners would be pretty hacked off to discover that Google were building their apps with other (better?) tools that were denied to them.

Highly doubt that would be the case.