At the time it was submitted, Apple was not purging "low quality" apps - and as the noted in the Register story, Apple thought enough of its implementation to call the developer and request his CV. This would be more consistent with Apple's engineers being impressed by the implementation rather than it would be consistent with its poor quality being obvious.
Furthermore, given your premise that Apple had something in the works but could not create an implementation which was good enough, it is clearly plausible that Apple's technical review of the app provided a roadmap for improving their implementation to the point where it was good enough.
Finally, it is highly unlikely for poor support to have been a reason for rejecting the application because it can rarely if ever be determined for new apps. The infringing icon argument is not backed up by the fact that Apple did not mention it in their rejection and has not taken legal action in the year it has been in use for the jailbroken versions.
I will be the first to recognize that the plausibility of one line of speculation regarding the course of Apple's actions is no more evidence of an actual state of affairs than the plausibility of other lines of speculation within the discussion are evidence that those events indeed occurred.
Furthermore, given your premise that Apple had something in the works but could not create an implementation which was good enough, it is clearly plausible that Apple's technical review of the app provided a roadmap for improving their implementation to the point where it was good enough.
Finally, it is highly unlikely for poor support to have been a reason for rejecting the application because it can rarely if ever be determined for new apps. The infringing icon argument is not backed up by the fact that Apple did not mention it in their rejection and has not taken legal action in the year it has been in use for the jailbroken versions.