It's a mobile device. They will at most allow people to write small applications for it. Not get deep and dirty with the applications and create plugins for safari and such.
How would you like installing something that makes your iphone really unstable or even kills battery life? Probably not right?
They will allow devs to write applications, BUT they will have a very minimal impact on the device itself.
I meant by OS SDK, the link-libraries to allow application developement. (didn't mean open source OS). Apple has already stated they will not release it,.. only allow Safari dev (w/ no flash or java, (only javascript)).
PalmOS did its users a great service by allowing 3rd party developement of apps.