This may be another reason we really really want the update. I don't know if the telephony hardware is the only requirement we are not meeting?
This comes from:
http://source.android.com/faqs.html
What does "compatibility" mean?
We define an "Android compatible" device as one that can run any application written by third-party developers using the Android SDK and NDK. We use this as a filter to separate devices that can participate in the Android app ecosystem, and those that cannot. Devices that are properly compatible can seek approval to use the Android trademark. Devices that are not compatible are merely derived from the Android source code and may not use the Android trademark.
In other words, compatibility is a prerequisite to participate in the Android apps ecosystem. Anyone is welcome to use the Android source code, but if the device isn't compatible, it's not considered part of the Android ecosystem.
What is the role of Android Market in compatibility?
Devices that are Android compatible may seek to license the Android Market client software. This allows them to become part of the Android app ecosystem, by allowing users to download developers' apps from a catalog shared by all compatible devices. This option isn't available to devices that aren't compatible.
What kinds of devices can be Android compatible?
The Android software can be ported to a lot of different kinds of devices, including some on which third-party apps won't run properly. The Android Compatibility Definition Document (CDD) spells out the specific device configurations that will be considered compatible.
For example, though the Android source code could be ported to run on a phone that doesn't have a camera, the CDD requires that in order to be compatible, all phones must have a camera. This allows developers to rely on a consistent set of capabilities when writing their apps.
The CDD will evolve over time to reflect market realities.
For instance, the 1.6 CDD only allows cell phones, but the 2.1 CDD allows devices to omit telephony hardware, allowing for non-phone devices such as tablet-style music players to be compatible. As we make these changes, we will also augment Android Market to allow developers to retain control over where their apps are available. To continue the telephony example, an app that manages SMS text messages would not be useful on a media player, so Android Market allows the developer to restrict that app exclusively to phone devices.