The Air 1 isn't crippled, nor is there any reason that it shouldn't be upgraded to iOS 8. Comparing it to the iPad 3 is a bit silly, the 3 had it far worse.
The Air 1 though wasn't a screaming buy when it came out and still isn't a screaming buy either today. Its basically mostly like the iPad 4 but just a reskin without substantial hardware upgrades. Air 1 was just a shell/skin game.
Air 2 is a significant upgrade - 3 core CPU, 2GB of RAM, Touch ID, coated glass, new glass sandwich... these upgrades are more than skin deep. The Air 2 is a screaming buy... the Air 1 was just a buy me if you think I'm pretty proposition. The Air 2 will definitely outlive the Air 1, with its significant hardware upgrades.
How short our memory is.
The iPad Air was a substantial improvement over the 4. It was between half again and 3x as fast in nearly every benchmark. It improved battery life greatly yet was substantially thinner and smaller. To discount the form factor change is to ignore how people use these devices. The Air was the first full sized ipad to not feel like a brick in hand, and fast enough to be comparable to full blown computers. It totally transformed the experience of using the device. I own both a 4 and an Air and have used them both every day for over a year. The 4 has exactly the same problems as the Air, despite the 64-bit thing. On both of them if I want the browser experience to be anything like stable I have to use a third party browser. Yes, more RAM helps, but the fundamental problem is Apple needs to change the code so there is never any doubt as to whether your tabs are going to be reloaded or not! These devices are now full blown computers; we need a more reliable experience than this.