I see that differently. Designer Steve didn't want to make things that didn't work nicely, and salesman Steve always sold what he had.
If the original iPhone had supported apps, it probably would have run them a bit better than most most other phones of the time, but it still would have run them badly.
[IIRC, there also was the issue that time to market meant there was no SDK at the time; it wasn't even clear how apps would be kept separate from the OS. Even if there were a clear idea about it, I somewhat doubt Steve would have allowed apps on version 1. The risk of apps interfering with the user experience on that hardware was just too great]
Whatever the reason(s), there was no support for apps at release. So, salesman Steve sold the idea that users wouldn't want apps, just like he sold the idea that users wouldn't want to look video on their iPod. And both were, when he said it, not untrue for the average consumer (that video would have been a low-contrast postage stamp that you would have to transfer to your iPod at home. Sure, some people would do that, but it wasn't ready for the masses yet). Nowadays, he would probably say nobody wants Google Glass, too.