I know many people who were and are on that team, and am well familiar with the described meeting. That meeting doesn't change the fact that Apple shipped MobileMe while SJ was CEO. It was a bad product that had a horrendous launch; SJ could have delayed the launch or killed the product, but didn't.
Jobs was a marvelous CEO, but Apple made many missteps – some larger than the current uproar over iOS 6 maps app – while he led the company. Without having personally knew the man, one cannot claim what SJ would have done in this situation. Plain and simple.