> The smart thing would have been just saying he wanted the iPhone to be smaller, money and resources is no object and we're willing to dedicate time/people to this project to get proposals put together.

That's just bland business-speak. Jobs had a knack for illustrating things in unexpected ways and this was it. I have no doubt that whoever saw the fish tank thing had the same takeaway as if Jobs simply said he wanted the iPhone to be smaller and there would be resources dedicated to it.