Is the Android OS for mobiles really competent?

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I used to love Android when it was freshly released, but I am beginning to have second thoughts now. Android is a free and open-source OS, right? And it can be used by any cellphone maker. And that's what I think the problem is. The Android is being used in many different products by people, like some people use it in a multi-touch phone, some in a phone with a resistive touch screen. Some people use Android in a 600 MHz processor, others in a 1 GHz Snapdragon processor. Some give high resolution, other's dont. My question is, don't the developers face a lot of difficulty creating an app. for Android Market as different Android Phones have different specifications? Doesn't it hinder the development and growth of the Android Market? Does it make the Android OS and the Android Market actually competent to the other biggies like iPhone OS, Symbian OS, webOS, etc.? What do you guys think? Share your thoughts on this. Regards, AJ-Rox