I don't think anyone was implying that Red Octane was first. Guitar Freaks was good, but it hasn't had anywhere near the effect that Guitar Hero has had. I'm not sure if it's the addition of more tunes or simply better timing.
Anyone can see that Guitar Hero has been seven times the hit Guitar Freaks was, it doesn't mean that Red Octane did it first, it means they did it at a better time and maybe even in a better/more immersive way.
Personally, I just hope they're not trying to sell another guitar with their game. It won't fly, and it won't work. They better make it playable with Guitar Hero's guitar. It just wouldn't make sense to alienate the people who already own Guitar Hero by forcing the purchase of their controller.
What will be interesting, is to see if the Guitar Revolution and Guitar Hero games share any songs. I'd hope not, but then again there are only so many smash hit's that most everyone will enjoy.