Google should let it lapse, nothing would say that iOS devices are no longer the cool thing to own then having Bing or a lousy Apple brewed search engine be the default.
I'd also be interested in the potential legal angles here: since Google are competing with Apple in a separate market, are they allowed to use their position as search leader to harm Apple? (e.g. by not offering similar deals it offers to other organisations like Mozilla, knowing that Apple doesn't have a choice but to use them anyway?) I suspect not, at least now now Bing is a viable alternative, but maybe a few years ago it'd have been a different story.
"A billion here, a billion there and soon we're talking about real money" ;-)
Exactly why it would be damaging. People still think of Bing, etc, as second tier despite similar results.