Tony Fadell, in an interview with VentureBeat:

I had a team making it compatible with the PC and Steve’s like, “OVER MY DEAD BODY! Never! We need to sell Macs! This is going to be why people buy Macs!” I said, “Steve, the iPod is $399. But really it’s not. Because you have to buy a Mac!” We had to give people a taste. […]

He finally said, “Okay. But under one condition. We’re going to build these and run it by Mossberg. And if Mossberg says it’s good enough to ship, then we’ll ship it.” He wanted to divorce himself from having to make the decision. But Walt said, “Not bad. I’d ship it.” That’s how we actually shipped on the PC.

Now we know why nobody told Walt to get off the table at that Apple event.