Hey, I agree with most of what you say here (iLife and iWork are great). But .Mac? I am currently with .Mac, and have been from the start. But to say .Mac has had "significant updates" is a joke. The service creaks.
I would say Apple is off their game though - in the sense that they are making blunders that affect many of their loyal users and developers. You only have to look at the decisions they've been making lately - the whole ringtone thing which smells of Apple getting way too big for its britches, "secret" features coming in Leopard that amount to a laughable desktop (developers at WWDC actually did) and a transparent menu bar, a phone which doesn't let you add real applications so developers have to hack it in order to add new programs, an insult to developers telling them that Apple have a "sweet" way to develop apps for the iPhone which is basically making web pages, screen issues with hardware, adding cover flow everywhere even when it is next to useless outside of photos/albums, and a new nano whose proportions look odd and are unusual considering Apple's usual attention to aesthetically pleasing design. There is probably more - Apple TV being next to useless outside the US, and not supporting real HD, or codecs that the rest of the world use, springs to mind.
That's not to say that Apple's stock price has suffered. But if Apple continues down this route it will. Talk to a few real Apple fans and there is a feeling that something isn't right.
Who knows the real reason. We often assume Steve is close to all the details, telling everyone what is and isn't right. I'm not sure this is true, but if it is, he's been concentrating so much on the iPhone lately, that he has neglected Leopard. Even if it isn't true, Apple has spread its resources so thin that most of the Leopard developers have been on the iPhone, and thus Leopard has had little input, and people left on it may not have the skills of the previous team and are making poor interface decisions. Or maybe Apple has got so large with so many products that they've had to hire a lot more developers - and any one who works in the industry knows, there is only a small number of really good designers and developers in the world - as you get bigger and need more resources the resources you get are of lower quality. Maybe Apple are hiring the sort of resources that work at Microsoft now.

That would explain many of the Leopard decisions.