The craziness in Android updates, which is especially highlighted with the Ice Cream Sandwhich update, is a problem that needs to be solved. But the solution is in the works. The solution is called Motorola Mobility.
Does anyone really think, a hardware company under Google's umbrella will have the same problem issuing Android updates as the Galaxy S? Of Course not. Because the hardware produced under Google will have all these tweaks worked out.
Schmidt, and company, can say all they want that Motorola will not get preferential treatment, the truth is, any Google project manager worth their pay (or who likes their job) will make sure problems like the Galaxy S will not happen. This is inherently 'special treatment'.
This will clean up the Android fragmentation, somewhat, but it will definitely cause consumer to shy away from other Android hardware partners. (Or relegate the other partners as second tier android devices.)