"If that's the case, why can't they drop OS X and iPhone and simply make clones, just clones with polish and attention to detail?"
I don't think you understand what it takes to reach apple's level of polish and attention to detail. They simply can't achieve it without innovating.
"I can't figure out why Apple would bother if everyone else could "adopt" their innovation wholesale."
That's like asking why Intel would bother developing a new faster processor. Someone else will just "copy" their innovation and develop a processor just as fast, no?
You ask where I draw the line, and there is a line that I would draw. But I want to ask you where you would draw the line. Do you honestly believe that for the next (slightly less than) 20 years, no one except for apple should be able to develop a product with multi-touch capability? They don't seem much interested in licensing the technology. Do you really believe that when a bunch of companies are developing the same technology, the one that gets lucky and files it first should be able to lock everyone else out of using it for 20 years?
Yes, there has to be an incentive for innovation, but creating monopolies on whole classes of technology should not be that incentive.