Do keep in mind that Android predates any public knowledge of iPhone by several years and that also came into being as a startup, not necessarily expecting to have the kind of impact up front that a company like Google might have.
Either way, I believe choosing the Linux kernel has turned out to be a good decision. We're happy with it technically and that's what matters the most. The platform's doing quite well -- I believe the latest figures we've mentioned publicly (during Eric's keynote at MWC) are 170 compatible devices, 27 OEMs, 169 carriers, 69 countries, and over 350,000 new devices being activated each day.
I've seen a lot of doom and gloom predicted from the moment we announced the platform and the SDK in late 2007 all the way through present day, but so far things have gone well despite the doomsaying.