That quote sums it all up.
Most of Dustin's suggested extensions are things other people should have built on Twitter. Of course, it also keys into Dalton's App.Net plan where Twitter should have been the stream and people should have used a countless applications to make the stream more discernible and allow Twitter focus on ensuring the backbone stays in place.
Funny enough, that is how twitter originated. Others built their clients and they focused on the core. They lost that direction and wanted to "own it all" like Facebook. But they took that direction rather too early.
Take Tweetstorming as an example which is a niche need. My team built a tweetstorming app http://writerack.com. It pulls and pushes all it's content from and to Twitter. In an ideal case, Twitter should support it and similar ones rather than making Twitter.com more convoluted with the aim of doing everything themselves.
If Twitter had supported third patrty developers, someone/people would have built a killer app for using twitter to follow and interact live events. That would have brought another set of people into the platform and that extends to other use cases too.
Hopefully, Twitter gets it right because I have come to really find Twitter useful.
The tweetstorming thing, for example, conveniences particular writers at the expense of all the other writers (and quite a number of readers). I hate it, and will unfollow anybody who does it regularly. It's the tragedy of the commons for an attention economy. Twitter's demand that people be concise is a large part of its value to readers. The more they control the UI, the easier it is to nudge people in particular directions that shape good user experiences.
But that's a small thing next to making money. To experiment with various ad products, they need extremely fine grained control of and reporting on user experience, and they need to be able to rapidly change that as they come up with new ideas. That's hard enough even when they control everything; getting a zillion developers to do that is impossible.
Focusing on the core was great, but nobody was paying them for the core. They're spending ~$1.5 billion/year. Anybody who says, "Twitter should do X" without explaining how their plan will help pay the bills is not going to get a lot of consideration at Twitter HQ.
Re: Annoying Tweetstorming.
People should be able to mute content from certain apps. Just like you can silence your Candy Crushers.
Re: Making Money.
On a sarcastic note, "I'll think of a way if I am paid 6 figures a year" :). But seriously, we are making content more valuable by adding more people to its service. Twitter can retain the rights to serve ads on those third party services while sharing some of the ad revenue.