Bill's suggestion essentially amounted to, do what I say and you can be as big as I am.
At the time, Apple was, I believe, sixteen times the size of Microsoft. And not only that, Bill wanted a piece of the action.
The deal, as Bill wanted it to happen, would have been a bad business decision for Apple.
That said, I'm convinced Apple could have made it as a direct Microsoft competitor if John Sculley, Michael Spindler, or Gil Amelio had been serious about cloning.
At least, for the time being, Apple could live off of software and iPod sales, some of which are quite high-margin, as it attempts to shift its business model from computer sales to OS licensing.