Fragmentation is going to be hit on the head with the release post 2.2. The current reason for it is those god forsaken addon GUI's, sense (being the least offensive) and the others bolted on my the manufacturers. They are deeply linked to the low level code in android and it just means extra time to catch up.
Here jumps in Google, making is to the whole GUI is going to a modular layer on top so that a phone with Sense on it for example can upgrade the core of android to 2.2+ without having to mess around with upgrading the overlay. Sure the sense overlay will not have a new feature here and there, one that could come to mind is the ability to turn off 3g with a single click - currently not possible in android, will be added and the widgets wont support it. Minor issue.
With fragmentation out of the way and moving onto hardware, Android will remain on the pinnacle of tech albeit with a cost. Apple do product amazing hardware, sometimes their evangelical ideas produce substandard designs (example being the older iphones having no volume controls on the side and being told by Jobs no one wants them only to being seemingly added in the iPhone 4). As Huung has said the fact that I'd guestimate over 60% of the remaining manufacturers have adopted a single core OS will eventually be the winning feature here.
Remember Apple did this once before in the the desktop space. Closed systems die natural - if not extended, deaths.
PS; I'd sleep with the entity of google if I could, inb4 anyone goes for the fanboy approach.