At least when HN readers get hysterical it's about something (a) related to hacking and (b) really bad.
Are you sure the TOS would change, if there was no backlash, like the one you're seeing on HN right now?
Protests usually precede revolutions.
The most influential and powerful man in technology has a vision that many of us find appalling. He is imposing that vision as we speak and is being very successful in doing so. After years of rational debate, many of us have come to a conclusion about Jobs's intentions for the computer industry - a conclusion I see as perfectly reasonable and rational. It is no good closing the stable door after the horse has bolted. The developer community needs to air its grievances now, while there is still something to play for.
Geeks have really short memory: Apple has always been evil. In the famous 1989 lawsuit between Apple and Microsoft about whether look and feel could be protected by copyright, all self-respecting geeks rooted for Microsoft, and the League for Programming Freedom was founded basically in response to it.
If successful, it would put a significant dent in the viabilty of the Android platform. If Apple can give an "us or them" (or do it twice) ultimatum and get people to pick them (even grudingly), then they've won. The Mac desktop floundered against the PC for years due in no small part to the fact that all the developers were developing for Windows, and didn't really put much thought into cross-compatibility with Macs. Apple is attempting to repeat history, but with themselves on the other end of the equation this time.
It's a risky, ballsy, and brazen gambit, but if they pull it off (after all, the suits who write those developers' paychecks just care about the $ on the balance sheet at the end of the quarter), it could be a decisive turning point against Android. Jobs is obviously doing his best to water down the Android market (they have PORN! UNCLEAN!) and Apple is in full-on assault mode against Android (via HTC at the moment), and there's a very good reason for it - Android is suddenly a very real threat.
According to the February metrics from AdMob, Android has a marketshare equivalent to Apple's in the US. Apple still has a hefty lead worldwide, but Android is growing by leaps and bounds, while the iPhone remains stagnant. That's a very real and very direct threat that Apple is pulling out all the stops to counter.
In some ways message boards are to hackers what close knit provincial rural communities are Jane Austen novels. A place of petty intrigue and gallantry.
Also, I believe, they are at least partly doing this to improve the quality of the App Store ecosystem and do this to avoid the tens of thousands of shite autogenerated apps that litter the app store and this move is more of a cleanup instead of screwing over the few people who prefer a different toolset for development and generally care about the quality of their applications. Baby with the bathwater, so to speak.
I think due to the nature of hacking and hackers, most people here hate being told how to do their job, especially for what feels to them to be spurious or irrational reasons.
I suspect people would have responded better to a more narrow (though perhaps legally more problematic) "no Flash" rule, rather than the legally safer but over-broad "no cross-compiling".