Well, one could argue that an App Store anything like the one that we have now -- i.e., all driven by digital downloads -- was fucking stupid for the Mac at the time, given that the time you're talking about sounds like it's over two decades ago and the majority of users who were online were still using modems. Time may have proved your concept right, but that doesn't mean your timing was right. :)
I don't know whether Jobs really wanted the iPhone to be open all along and was just playing dumb with his "sweet solution" of anemic web apps. Some of what I've heard from others supports the idea that he really did think web apps would work, but it also seems to be common knowledge that they were working on what became the iPad before the iPhone, and it seems pretty unlikely that they were planning to shop that without support for third-party applications -- although, of course, they might not have been thinking of an app store.
I don't know whether Jobs really wanted the iPhone to be open all along and was just playing dumb with his "sweet solution" of anemic web apps. Some of what I've heard from others supports the idea that he really did think web apps would work, but it also seems to be common knowledge that they were working on what became the iPad before the iPhone, and it seems pretty unlikely that they were planning to shop that without support for third-party applications -- although, of course, they might not have been thinking of an app store.