That "smoke and mirrors trickery" is actually called "a quality product." So much so that even the lowly 3GS has outsold most new Android devices. When you make only one (or at most two) phones, and the competition makes an ocean of them, your paltry two models had better be damn good. And we've seen that they are.
Maybe when the competition decides it's time to get serious about the User Experience and adopt a vertical business model, controlling the experience right through from cradle to grave, they can achieve what Apple does with their "smoke and mirrors."
"Quality and performance" are the reasons for the sales volume. When you sell only two phones against hundreds (if not more) of competing devices at all price points, nailing quality and performance is an absolute necessity.
I really don't think it's the quality or performance of an iPhone that sells so many of them. Are they decent phones? Yes. Are they better than all the other smartphones out there? Highly debatable, and really comes down to personal preference.
iPhones sell because of the logo on the back. That logo does not represent as you said, "quality and performance", it represents a fashion statement. iPhones are "cooler" then other phones out there, just as iPods are to their competition. There's nothing inherently wrong with iOS, but there are other mobile OS's with a decent amount of more features and better ones, and vice versa. The average consumer is pretty unlikely to really compare say, iOS and Android side by side. What they do is use one or the other and pick that one. Or possibly, try neither and pick the one of which the marketing appeals most to them. Which Apple is insanely good at, hence the smoke and mirrors.
Point is, whether or not the iPhone really is a quality product, is mostly irrelevant to its sales. It could be a worthless piece of junk, and it would still make a tidy profit for Apple. It's a shiny, sleek looking phone that a well known high end electronics company has cleverly marketed the hell out of.