They are not doing it arbitrarily. Their position is that the iPhone 1G will not support the level of user experience (speed, performance etc) necessary for their standards to be met.
No, their position is that the
iPhone 3G and 2nd generation iPod touch will not support the level of user experience (speed, performance, etc.) necessary for standards of the full OS 4.0 to be met. Therefore, they are releasing a feature-reduced version of OS 4.0 for those devices. It is highly likely that this position is the truth.
They didn't actually express any official position about the
original iPhone or the original iPod touch. If they had tried to express such an official position, then they would have been faced with the contradictory situation that the difference between the user experience (speed, performance, etc) on the original iPhone and the original iPod touch versus the iPhone 3G, would have been virtually undetectable.
Additionally, it costs money for the company to keep porting it back to the original hardware. Where does this money come from? Apple no longer gets a monthly revenue cut from the iphone 1g.
This.
And also, the fact that Apple's interpretation of generally accepted accounting principles leads them to the conclusion that they must "pay for" future feature enhancements to products that have already been delivered to the customer.
They use a trick of accounting to hold back some of the money from the initial sale of the device. They gradually put this held back money on the books over the course of several years, to account for the new features that are being added through software updates.
The held back money from the original iPhones has all dried up, so there is no more money left to "pay for" new features in the original iPhones. So, if they wanted to continue releasing new features for the original iPhone, they would have had to charge the customers directly to purchase the upgrade. That would create a schism in the market, where some iPhone customers get the OS for free, but others have to pay for it. Many original iPhone owners would probably feel even more indignant about having to pay for the upgrade even though other iPhone owners didn't, and wouldn't bother buying the upgrade at all. So Apple wouldn't be able to stand to recover the costs they incurred in engineering the upgrade in the first place. It's easier and less damaging to their image to simply not release the OS for the original iPhone at all.
Best of all, if anybody questions the decision, Apple can count on 3rd party apologists to make up unfounded, technological-sounding FUD about the iPhone being fundamentally under-performing, from a computational standpoint, compared to the iPhone 3G.