4th generation iPod touch is 960 x 640 = 614,400
1st generation iPad is 1024 × 768 = 786,432
Those extra 172,032 pixels could have been enough to prevent something from performing adequately.
That kind of short-term thinking is what gets companies into trouble. No, it won't help the bottom line now, but when the next purchase rolls around, don't you think premature obsolescence (or the lack thereof) of the device being upgraded will factor into what replacement to get? It's certainly a major reason I won't buy an android device (at least one not made by google, which tend to get long term support like apple)
Drastically ?
The core of iOS is fundamentally the same as OSX and there are shared components. If Apple could figure out how to dramatically reduce memory usage they would have done it by now.
OSX heavily uses swap, even when a lot of memory is available (the dynamic pager). On iOS, the dynamic pager is disabled. This is particularly an issue with a language whose default memory allocation behaviour is as bad as Objective-C's - if an app gets backgrounded and frees all of the objects in a 4K page, save one (no matter how small), it will consume 4K until that changes or it gets killed. As it's not a managed language, the heap can't get compacted.
A second thing that's horrendously inefficient about iOS (as far as I can tell - they don't expose this stuff much) is that all of UIKit/Core Animation uses 32-bit/pixel textures. Things like text labels could easily use 8-bit textures with vertex colours for tinting. 8-bit PNGs or GIFs loaded as UIImages are decoded into 32-bit textures, too - okay, the hardware doesn't natively support palettes, so this would take a little bit of extra work to support. Finally, the hardware does support powerful compressed textures (PVRTC) which would suffice for many (most?) images used in apps.
I'm sure with a bit of engineering effort, the memory footprint of iOS could be drastically reduced. (Hire some game programmers who have worked on console games! A 1st gen iPad has about 3x as much memory as a Wii.) But let's face it, that's not going to improve their bottom line, whereas telling everyone to buy a new iPad every 24 months is.
Still, those 15+ million iPad1 owners aren't going to be all that pleased, especially those who paid through the nose for the 64GB model. (don't feel too bad though - us 16GBers already got shafted anyway when apps suddenly went huge due to retinafication)