Did he know that they were going to be terrible? Given Apple's history of making attractive devices, I for one didn't see this coming.

Steve Jobs was at the helm for the Flower Power iMac, remember.

http://www.forevermac.com/wp-content/uploads/2012/11/picture...

The Steve Jobs that left Apple as the most valuable company in the world had matured quite a bit from the one that released those.

People tend to learn from disastrous mistakes.