I think you are splitting hairs. What would be the point of "legally" allowing you to build an app that could not be submitted to the App Store? The only way to distribute it would be to "illegally" jailbroken devices.
> What would be the point of "legally" allowing you to build an app that could not be submitted to the App Store?
Simple, you can use it personally, or for example submit it to Cydia or any other place without Apple's censorship. Just post it as a download after all. There is nothing illegal in distributing for jailbroken devices.
But that's really irrelevant. The license here doesn't even get to that part - it forbids you to build the browser, regardless of any of your further plans how to use or distribute it. It's completely sick.