The front facing camera limitation is a well known method to limit installation on incompatible devices.
The new iPad has 1GB ram. The iPad 2 has 512mb. The original iPad only has 256MB. iPhoto needs ram to load up a 19MP file and edit it, provide undo levels etc. That is the real reason for the limitation. When you multitask on an iPad 1 it keeps having to reload everything, it was ram crippled from day one unfortunately. I know this is frustrating, but what can you do.