Modify the hardware? lol...like all the modifications people are making to all the other smart phones on the market? What hardware modifications do you want to do to the iPhone that are common place modifications found in the Samsung, Nokia, Blackberry or HTC worlds?
As far as software goes (mainly, jailbreaking), the only thing stopping you is getting around the code in order to properly jailbreak the device...the same things have to be done with devices running Android OS...is it easier to do it there? Yup, but it's not like the iPhone is completely shut out either, it's just a little more tedious (which is why it takes a little longer to get the jailbreak out).
There's nothing odd about it...they are trying to provide a smooth and optimal OS experience, that doesn't come with allowing people to just do as they please with it, it has safe guards for a reason, and it's what attracts many people to the iPhone in the first place (as well as Mac OSX for that matter).
Keep in mind that the niche of people like you, who want all this access and ability with these things is VERY small compared to the rest of the market that buys the phones.