The rumor is that Apple replied "If you believe that you can make the necessary changes so that iBoobs does not violate the iPhone SDK Agreement we encourage you to do so." Ooops, someone already pointed that out... anyhow...
We were thinking of doing a jiggle app with a breast cancer awareness theme but I still don't think Apple would approve... that would open the door for other 'balls out' apps like "My Left Nut".