If what you said was true, there would be far fewer apps.
How many apps are available on the Mac that duplicate some function of iPhoto, iMovie, Numbers, Pages, etc etc?? I'm sure there are lots. I don't understand why Apple stops apps from being distributed if people want them.
Some form of app at the App Store is bound to step on Apple's toes. THAT is software development. You try to make something original, or something better (or both). Look at Mac software development. Do you hear disaster stories from them? Should Firefox be rejected? Camino? Opera? Should Adobe Lightroom? Cocktail? PathFinder?
Also, what you said isn't clearly stated in Apple's restrictions for iPhone development. As far as an application doesn't breach Apple's restrictions, it should pass through their system. Period. That's it. No secret restrictions at Apple HQ, no making up rules on the fly. Nothing. So no, duplicating a function on the iPhone shouldn't result in a rejection of an app.