Are Apple and Google needlessly destroying each others margins, here? Apple pushing ahead with this will just make Google desperately push Android as hard as they can.

If Google's ecosystem were left alone on iOS, Google would have fewer reasons to push Android heavily. On the other hand, if Google need Android devices out there in order for their ecosystem to survive, they might be more willing to see Android devices put into consumers' hands at break-even (or even loss-making) prices. Apple will either see market share decline or need to sacrifice part of their margins to maintain share.