How is the unlocked hardware competitive in performance and price?
I got a T-Mobile G2 for $0 with 4G service and a decent hardware keyboard. I couldn't get an unlocked android phone at any price with a hardware keyboard, and neglecting that feature a Nexus S would have cost me $200 with only 3G data. Before that the Nexus One was unsubsidized but would have cost the same per-month (you could have gotten a discounted rate at the time if you didn't have a family plan).
At some points in time the unlocked models are somewhat competitive, but more often than not they aren't. The fact that they only come out about once a year doesn't help - if your upgrade cycle is off by six months it will be hard for the free stuff to ever be feature-competitive.
Unlocked phones are clearly the best solution to the lockdown problem, but right now there just aren't enough of them, and vendors don't want to promote them. I doubt that would ever change without some kind of legislation.