It does "support" 1080p output - I have 1080p selected on mine - but this is just the output resolution. It's the same as upscaling DVD players - just because they output 1080p doesn't mean they can play 1080p content.
The specs are locked down pretty tight - no CABAC stuff, maximum of 5 Mbps and 24 fps max. For 30 fps stuff you only only get 960x540p. The GPU is also limited by the 1 GHz cpu - if you remember, when HD started coming out people needed pretty beefy core2duo chips to get 1080p playback - gpu acceleration has only come about in the last few generations of gpus.
I wish it could be soft-upgraded to support 1080p, but I don't think a new hardware revision based on the new iphone internals is coming.
The specs are locked down pretty tight - no CABAC stuff, maximum of 5 Mbps and 24 fps max. For 30 fps stuff you only only get 960x540p. The GPU is also limited by the 1 GHz cpu - if you remember, when HD started coming out people needed pretty beefy core2duo chips to get 1080p playback - gpu acceleration has only come about in the last few generations of gpus.
I wish it could be soft-upgraded to support 1080p, but I don't think a new hardware revision based on the new iphone internals is coming.