tipsy,
I wont speak for the devs but i suspect oz.runways is optimised for the latest revision of the hardware. at this point the ipad 2
the difference in processing power between the 1 and the 2 is huge.
the 2 has double the RAM. the processor jump is 2X. the GPU, well that's a completely different class, a couple of generation jump.
"Apple states that the CPU is twice as powerful and the GPU up to seven times as powerful as its predecessor, the Apple A4"
AnandTech - Apple iPad 2 GPU Performance Explored: PowerVR SGX543MP2 Benchmarked
there are many apps that will not run on an ipad 1 that run happily on a 2. just like there are apps that run happily on a iphone4/4s that will not load on an iphone 3.