How can a .pdf format version be legitimate when you read the license that way?
Because Apple allow it.
Their T and Cs are about what they do not allow. When they use terms like "Works" and not ePubs or eBooks, it allows them to encompass what they will, when they want.
All this is hyperthetical, because as yet as far as I can see, there is as yet no way to convert an .ibooks or an .iba file into another format.
Copyright was brought into the thread and litigation.
Take any template issued free with iBA and the individual files are combined in a layout. It is suposed that all images are either public domain or owned /licenced to Apple - who allow free use - for free or paid iBooks.
Convert those files into ePubs or whatever and retain those images and potentially there is a copyright infringement. Ditto any code that is carried over to the converted version.
As I also wrote, I doubt very much Apple is really interested in low volumn self publishers earning a few dollars. Apple write their terms to warn off their "bitter rivals".
Last words, I agree to differ