I think there is another story hidden there - taptaptap has become so famous that people just buy whatever they put out there. Good for them, but hardly something to draw parallels from.
I think the big attraction is the great design. it is a beautiful looking app. There are plenty of free apps that do the same thing, but loop rubbish. People pay for beauty, otherwise that $10 hooker down the road would be laughing.
For another example, look at Tapulous. They started off with a bunch of small apps, and one of them, Tap Tap Revolution, took off. They've turned that into quite an app with numerous versions. Note that it's not just updates to the app but a bunch of more limited, artist/genre-focused apps. This kind of stuff is the key.
Regarding the milking/moving on - one of the most frustrating parts of iphone app dev is the incredibly long feedback loop. The app store means you aren't agile and can't respond to customer feedback as fast as you'd like. I think you're dead on with the model Tapulous used - cast a wide net, nurture what works, and milk the living hell out of it until it dies.
Regardless of the sales falloff, nice work guys, and congratulations.