iTunes and WMP are bloated crap that force you to sit through DVD warnings. WMP has gotten a lot more stable since Windows 7, but that's actually a case where it has taken Microsoft years to come up with anything approaching the usability of VLC. (And their fealty to the MPAA prevents them from taking the final user-friendly step and allowing us to watch what we want to watch on the DVDs we've purchased.)
Chrome is widely regarded as the front-runner among browsers. And to be clear, Google didn't make Chrome because they wanted a free (in both senses of the word) browser. They built it because they wanted a browser that doesn't suck. (Though I guess you could make the argument that KHTML was just a me-too product.)
I don't think Inkscape has any competitors, open or closed. It's an intuitive, full-featured vector graphics editor. Adobe Illustrator by contrast is certainly superior, but it has a learning curve that makes it unusable for people who aren't graphics designers. Inkscape is extremely innovative.
Other open source products I can think of with fantastic UX are Transmission (the BitTorrent client) and Colloquy.
I'm not sure that is a victory of OSS as much as it is that they have more freedom to play fast and loose with patents than a commercial/closed source developer would have if directly selling their software (particularly in the US market).
But if you look historically at most major open source projects, they aren't innovative. IMHO, most open source projects seem to stem from a desire to have a free (in both senses of the word) version of xyz proprietary/closed source software.
So we end up with lots and lots and lots of copies/equivalents to closed source software, only with a few esoteric additions for whatever itch the author needed to scratch and half the feature set gone.
Sometimes, the OSS version gets better over time, and even supplants the closed source version. But just as often, once the author scratched that itch, development stalls and very little innovation happens. Or alternately, we'll see dozens of entirely different reinventions of the wheel, where somebody didn't like the particular way the OSS version worked, and then just rewrote the whole thing again. I mean really, how many half baked personal finance software tools do we need?
In all of this, what doesn't tend to happen is novel innovation in desktop software. Open source games are rehashes of closed source favorites (I mean really, can anybody point me to a completely novel OSS game)? Desktop software tends to be free (as in beer) copies of expensive proprietary software (GIS tools, image editors, 3d modelers, laboratory tools) or non-user friendly academic research projects released into the wild. Taking gaming as an example, almost all of the innovation is happening in the closed source, indie gaming scene.
Basically, you can kit yourself out with less polished version of hundreds of thousands of dollars of proprietary software for free (that you can play with the code a bit), but that's about it.
OSS is sadly trapped in a cycle of non-innovation and has been for years.