Can I write Python applications using PyObjC that target NON-jailbroken iPhones?
No: it's Apple's deliberate policy decision (no doubt with some technical underpinnings) to not support interpreters/runtimes on iPhone for most languages -- ObjC (and Javascript within Safari) is what Apple wants you to use, not Python, Java, Ruby, and so forth.
Is it currently possible to compile Python and PyObjC for the iPhone such that AppStore applications can written in Python?
If not, is this a purely technical issue or a deliberate policy decision by Apple?