Yeah this doesn't seem right
iTunes isn't an OS, it's a media syncing application and music/video purchasing tool. Now that nearly, if not all, music has been made DRM free on iTunes there isn't any valid argument that demands Apple make it compatible with other products.
Pretty much all of the content on iTunes is available from online stores like Amazon anyway, so this was never a monopoly issue - which I suppose Palm know given their weird decision to attack from a USB standards viewpoint.
The ironic thing is if Apple decide they'll be damned if they'll let Palm use their software, Palm may very well have made their device incompatible with every online store. Amazon for example are explicit about their video files not being compatible with the iPod and it wouldn't surprise me if that incompatibility now includes the Palm Pre.
And even Apple fanbois admit iTunes is at best an average media management tool. It's slow, messy and unintuitive. In fact it isn't any better than Media Player.
If Palm had decided to make a decent media application, their iTunes using customers could have continued to use iTunes and may well have decided to get any video or audio book content they wanted from somewhere like Amazon. Not that it matters, not many people use a cell phone to watch movies or TV and probably never will. There just isn't a need for it outside of waiting at an airport gate or sitting on a train. Even then pretty much any computer would be better, which most traveling workers with cell phones have in the form of a notebook.
A real breakthrough would be to create a media organising and purchasing application that sync'd and organised music bought from iTunes (or any other store) as well as allowing direct purchasing from Amazon and perhaps a few others.
If the application improved the experience of organising, playing and syncing media then pretty much everyone, even non-Palm users, would take a serious look at it. Other applications exist that do some of this, but none of them allow you to purchase directly from non-iTunes stores (as far as I know) apart from those stores own klutzy and even worse than iTunes media players.