Indeed, pixel *density* is completely meaningless. Since density is (pixels / area), it favours devices for having a smaller display. But on my Galaxy Nexus, I like my large display. If someone took my phone, made it smaller, then the PPI would go up. But hang on, you've just made it smaller! That's not what I want.
In fact, you could take the device, reduce the resolution and make it smaller, but such that the PPI was higher, and claim that therefore it's better. But hang on, you've now reduced both the resolution *and* display size!
If anything, we should be looking at (pixels * area). Or better yet, just record them as separate specs.
Density is useful when comparing entirely different classes of devices - e.g., I wouldn't necessarily expect as high a resolution on a small device compared to a large device. It also might be a reason not to criticise a smaller device - e.g., if a smaller device has lower resolution, but the same density, you could argue that that's only that it's a smaller device, rather than having two things wrong with it. But it is absurd for anyone to claim that the smaller device is *better* simply because the density is higher.
This is the only statistic that Apple claim to lead on, and it's a meaningless one. And as you say, they've been well and truely outdone at their own game - with many phones and 7" devices having higher resolutions and densities than Apple. And now the Nexus 10 completely outdoes Apple's 10" tablet.
I think the reason people complain is not so much that PPI is an issue, but that it is judging it by Apple's own standard. And if you don't care about PPI, then there are zero reasons to get it - especially when it's also priced £100 more than the competition!
(I just wish we'd see higher than 1024x600 on netbooks - resolution is much more important on these devices, than it is on oversized phones.)