There are strengths and weaknesses in any market position. Ask Sony (what happened to their dominance in the mobile music player market?), ask Windows (what happened to IE's dominance), ask Yahoo (what happened to their search dominance), etc.
As we have seen with the smart phone market (that Apple dominated only a short time ago), it is possible to gain significant market share even if you are years behind in development. For tablets, all Google + hardware manufacturers have to do is show that they have a viable product at a lower price. They have got pretty good hardware (equivalent to the PC v Apple situation) and so-so OS, but (as you said) they lack the apps. It will come and Apple will lose huge chunks of its market share.
But, if Apple is smart (and I think they are), they will have already moved on to something else, and I bet they find a way to bring along a bunch of the customers they have managed to get tied into their ecosystem. INTEGRATION is the key, not the tablet.
Who cares about the iPad, when you have people hooked into all of your product lines?
People that point to iPhone sales, iPad sales, or any other single product are missing the point. Even if HP gobbled up a bunch of customers, they've got nothing else to offer. Neither does Android. The so-called "halo" effect with Apple is pretty powerful, and at this point I don't see any competitors (Sony and others have tried) who can come close to matching them in this regard. In other words, they can afford to lose market share in any line, and it won't have a significant impact on sales.