The iTunes store is designed to make it so that apple can sell more iPods. The prices are artificially low. Apple makes a lower profit then they really should on song sales because they are trying to sell more iPods and similar devices
No arguments there, except for your point about Apple not doing well on iTunes sales. They're taking a 30% cut on each sale in iTunes, so all in all, I think they're doing pretty well.
You need to remember that this is only revenue. Apple still needs to pay for infrastructure to have the songs delivered to consumers. This is more then a one time download per song as consumers can essentially download unlimited times after buying a song. They also need to pay for things like credit card fees based on their top line (total sales) but is likely paid for entirely out of the 30% margin