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Practicality is why. I don't want to have 2 videos of the same episode/movie which takes up an extra 1/3 of my HDD disc space because the iPod Touch/iPhone hardware isn't up to snuff. For a company that prides itself on simplification and optimization you'd think this was a no-brainer for Apple.
Tegra needs to be in the iPod Touch/iPhone in order to compete on a processing scale. As it has been mentioned Apple's mobile devices have become notoriously bloated and slow. Something needs to be done beyond a simple speed increase.