You misunderstand what an API is. API is a way for developers to access or use Twitters tools. The new retweet feature is one of those API calls that a developer can make.
The "old" retweet function wasn't implemented by Twitter at all. All Tweetie (and other clients) did was when you wanted to reply, copy the old tweet into a new one so you could edit and/or comment on it. The client (Tweetie, etc) would merely add "via" or "RT" and other tidbits of info stating that it was retweeted. NONE of this was implemented on Twitters side of things. It was all handled by the clients.
So yes, in essence Tweetie took some functionality away. At least the options for what Loren now calls "Quoting"