On the other hand, it might be a good time to launch/fund a product that competes. Without its developer ecosystem, Twitter is practically an unusable product. Sure, they have their network, but so did Myspace, Digg.

Twitter can't reasonably act like Apple and get away with it. It's a very low cost-to-switch environment. If this trend continues, if they make things too hard for devs, the devs will leave, and won't be in a hurry to come back. Might be a perfect time for a lean, developer friendly startup with the right innovation to come in and claim a piece of that market.