I'm starting to think that Amazon will avoid the whole fight with Apple by pulling the Kindle app (which shouldn't affect current users)...
It needs refining, and would probably have to be modified and updated to reflect the bells and whistles that are available on the other apps, bur what if it wasn't? ...
It seems like it WOULD affect current users, who use the app on their iPhone or iPad. The app currently installed
might continue to work, IF you never update your iPhone/iPad. An update would certainly stop the app from working. It's possible that even syncing to iTunes would cause the app to stop working. Apple isn't going to let the current app keeping working if they feel it breaks their rules (my guess).
Also, although I think the web version is a decent option, it does require one to be connected to the internet, so it wouldn't work well for people who want to read somewhere that they don't have a constant connection. I'm especially thinking of the non-3G devices (wi-fi iPad, and iPod Touch).
Regardless of these issues, I do think Amazon should NOT cave to Apple, and would prefer they pull their app if they can't find a reasonable agreement. Everyone will know it was Apple that was a di*k, not Amazon.