Everything. As I explained above, please reread.
> The app would still have to be updated when the API changes.
With an HTML5 API, the API can be stable and still support many new features, video formats, ad formats, etc without change. NOT SO if you don't let google have their iframe.
> Additionally, if that were a concern of Google's, why aren't their apps written in HTML5?
Because they can update their own apps whenever they want to, but they cannot force Microsoft to.
No they can't. Not on the phones, where it matters.
What is clear from this debacle, though, is that Microsoft was unable to write their app according to Google's guidelines, and then took 3 months and still couldn't fix it - which means that Google definitely cannot expect them to upgrade to newer APIs ever - so it doesn't seem onerous to require them to actually use the official API now.