What I don't get is why some believe that older devices will be incompatible with Apollo due to screen resolution and processor. Is Microsoft really going to release the Windows Phone 8 platform without the ability to push downstream, as Nokia wants to do?
The screen resolution is unlikely to be a factor, but I think you're oversimplifying the potential problems elsewhere. ARM CPUs aren't like x86s. These are System-on-a-Chip (SoC) designs, meaning it's got CPU, GPU, bus controller, radios, memory, etc all on that one one single chip that we colloquially call "the processor". Besides the feature creep, there are power, battery, and radio management issues that are specific to each SoC and very important to get right.
Beyond that, the WinCE kernel is a direct descendant of code that is contemporaneous with Windows 95. The WinCE kernel has about as much in common with Windows 8 as it does with DOS. So this isn't just an upgraded kernel, these two kernel have completely different set of assumptions about the capabilities of the machine, assumptions that were baked in years (or decades) ago.
One of those assumptions that appears to be baked into Windows 8 ARM edition is the new UEFI BIOS. They can possibly unbake it in order to help put WP8 on legacy devices, but risk introducing security holes if they do so. And this still wouldn't help the device driver situation (distressingly analogous to the Vista fiasco, since WinCE uses the old-style device driver system while Win8 uses the Vista device driver system).
It's impressive that the old apps will still run on WP8, testament to the abilities of .NET to insulate the application from the details of the underlying OS. But the OS's insulation from the hardware is the bootloader and device drivers, and Microsoft tossed that out with Vista.