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I think the PR handlers should have let Phil answer the rather benign question. Alan probably over reacted to this. Apple execs with enough PR coaching and experience - and "sans" the PR folks - are actually very approachable, in my opinion.
The iTunes *Store* is a different thing. Yes, it's a rip-off. You pay high-prices for low-to-medium bitrate downloads. But there's no obligation to use it with your iPod. Neither your iPod nor iTunes will be particularly lacking if you never look at the Store (although they have some fantastic free podcasts in there). You can use mp3s, AACs or various other files from wherever you want (with the usual observations regarding legality!)
The difficult with this subject is that people often conflate "iTunes" and "iTunes Store". Yes, the iPod is a better product if you use it with iTunes... no problem, it's a free app and does lots of cool stuff with podcast subscriptions etc. Complaining about the iPod not working as well with (for example) Windows Media Player is like complaining because some cool Toyota hubcaps won't fit your BMW.
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But seriously, they're just operating systems. I never got the constant Mac Vs. PC hostility..