Clearly shows you know nuts about the iPhone SDK.
I know enough about the iPhone SDK to know it is very physical pixel-centric. Contrast this to the Android SDK that is very pixel agnostic (which is how it isn't a big deal that one device has 854x480 and another has 480x320. The former simply looks better. Just as it isn't a big deal if aspect ratios significantly change, whereas in iPhone world developers had to rush to make iPad specific apps, just as now they'll have to make iPhone 4 variants if they don't want simple pixel doubling.
Nonetheless, I look forward to your clarification.
I am not familiar with Android SDK. Do you mean you can write one UI code that runs on all Android devices irregardless of their screen resolution? Such as on Nexus one and a tablet running Android?
The reason is almost certainly limited supply. If you want to sell millions upon millions of a device, and the premium part has limited supply, you simply don't use the premium part. The less obvious reason is that OLEDs simply don't come with that high of a density, so Apple would have had to increase the screen size or go with a lower resolution which, as mentioned in the following point, they didn't want to do (and it isn't to achieve some bogus "retina" quality).
>You characterize the fact that they went super high resolution to accommodate existing apps as a bad thing?
It's bad in that its covering a mistake. The iPhone SDK should have had density-independent pixels from the outset -- geez we've known about this problem for years -- but it didn't. It was remarkably shortsighted, and still they merely duct tape it.
>How many other companies would have chosen the cheap and easy way out?
Apple chose the easy way out, so not really sure what you're saying there. They went with a basic LCD display so I doubt the cost is all that great.