I meant to run flawlessly. In the past, certain iOS releases have run on older hardware but with limited features.
And yeah, I don't see Apple ever releasing a phone sans retina display. But that presents a hurdle as far as price.
Perhaps they'll forgoe the rear camera a la the new iPod touch.
Well I bow to your superior knowledge on processing power because I am not sure myself, but aren't a great deal of iOS 7's new features unavailable on older phones for this exact reason? This has always been true with each release of course, but I've read numerous reports of it being quite marked with iOS 7.
It would seem that the internals of this thing would have to at least be iPhone 5 level (camera filter, AirDrop) for it to make sense but I guess by the time it comes out, that will be "last years" guts.