Yep you'll need iOS5 for OzRunways v2.7 since it uses a bunch of new iOS5 features.
My IPad 1 has OS5 and it's a bucket of s88t. Constant crashes.
I've heard of a couple of problems after installing iOS5, but nothing that wasn't fixed by deleting & reinstalling apps again.
Also OzRunways v2.7 uses the GPU for most of its drawing now (instead of CPU) so it uses much less memory resulting in more stability (v2.7) on iOS5 than (v2.6) on iOS4.
We did a 2hr presentation at Renmark yesterday involving showing every feature of the app on an iPad2 and it didn't miss a beat.
The iPad3 appears to be ever so slightly slower than iPad2 since it now has to render the image files as double the resolution, and the CPU (which does this work) is only slightly faster. But it looks MUCH better! No crashes though. Retina icons & artwork coming in v2.7.1 in a few days.