Seems like a lose-lose-lose proposition:
end users: iPhone apps can only be viewed @ 132 or 66 dpi on the current iPads. x1 view could at least rotate to the current orientation of the unit, if retina isn't going to be supported. I have to physically rotate the iPad to use those apps, many times - which is not convenient when on a mount.
developers: additional overhead for iPad may not be justifiable. This "encouragement" doesn't seem to be working all that well - especially where Microsoft is concerned.
Apple: their "credibility" in terms of the necessity of the "retina" density threshold, and their perceived policy of not allowing their devices to do things "half-assed", is diminished by allowing iPhone apps to be displayed at 66 dpi. Having to unnecessarily rotate the device to use the iPhone app also diminishes the value of the statement "It just works".