I kind of doubt that Apple could have squeezed 10 hours of battery from a stock chip at the same performance level. Developing their own chip lets them create specific cycle saving instructions.
Hm... not really. A custom instruction set would require recompiling all iPhone apps, and prevent moving back to commodity chips in the future if they want to. However, P.A.Semi does have a lot of very expert designers, so it's quite possible Apple really can build a better chip.
They can also integrate exactly the non-processing functionality (IO, memory controllers, etc...) that they need.