The HTC One is beautiful, but the battery is atrocious - the iPhone has an incredible battery. The Nexus 5 is also a really nice phone, but the hardware is still not as nice as the iPhone (I admit this is a bit subjective though).
I think you're right that most of the android sales are low to midrange hardware, but there are no real high end options except for the HTC One and Nexus 5 which are not readily available in stores. The Moto X was solid though too - shouldn't not mention that one.
I think people who use iOS probably would not jump to an Apple device running Android, but there are Android users who would jump from their samsung device to an Apple one.
I don't think Apple would do this because they want control over their ecosystem and they want to force people into iTunes, Apple TV, iBooks, iMessage etc, but I don't think it's necessarily a terrible idea.