Considering that installing iTunes on Windows automatically installs the Apple Software Update tool, which then try's to sneak Safari in (by automatically selecting it to "update" the next time Apple Software Update runs), I don't think Apple is too concerned about frustrating the user with the "Install new software" step. They seem to relish it actually. ;-)

iTunes could be the bootstrapper that installs a slimmed down version of itself and the other broken out applications.

Yes, and then you have to teach your users about this new program... for what exactly?

You stop having to teach new users that a program called iTunes does a wide variety of non tune related tasks.

There's quite a large install base to retrain. The iPhone is, uhhh, pretty popular.

Also, iTunes opens automatically when you plug an iDevice in which mitigates some of this problem.

Mitigates? The fact that iTunes is going to load up ever time I plug in my ipod to charge it makes the software's bloatedness way worse.

I'm pretty sure you can disable this behavior with a checkbox.

Imagine the Internet Outrage they'd get over iTunes "installing all these new apps and who knows what spyware all over my computer". I agree with you, it sucks (though, it's not the end of the world) that it all goes through iTunes... and if they still only supported Macs, I bet they'd have broken some of this stuff out by now. But it's tricky in a Windows/Mac world.