Also, I forgot to put this with my other reply. There is a big difference between encouraging users to mod something and discouraging it. And that I think is the key difference.
I have Palm Treo. Palm has said quite clearly, we arent responsible for anything you put on your device thats not ours. You can put whatever you want on it, but we are not responsible.
Thats sensible. Its saying, the choice is the users.
What Apple is saying, is that the user has no choice. You either buy apps for your phone from apple... or not at all. I feel Apple is doing this for money. After all if you can only run aps they allow, then get a nice chuck of change off each software sale. But if anyone can develope and run aps... well then... there goes their ability to get a piece of the action.
I went back and read your original post... you said: "If Apple were to implicitly endorse running unapproved software by not defending this case then as the manufacturer they could potentially open themselves up to all sorts of litigation." Again... you're saying if apple were to endorse this stuff. They dont have to endorse it, they could simply allow it and leave the responsibility with the user, like most other companies do.
Endorsing modification is totally different than allowing it. The former is encouraging it... the latter is just understanding that it will happen.