..because it requires a newer version of iPad software.

A number of app developers have made the same mistake, including Loopt. Unfortunately, I think we will see more of this.

Tell the developer. They'll work it out.

They updated to support 4.0, but also set the MINIMUM OS version to 4.0!

Apple has a blind spot, and isn't catching this in the App approval process. There shouldn't be any iPad (or Universal) apps that have a minimum requirement of 4.0 - they should reject the app update, but they aren't.