Mostly, the features available on higher end Lumias running 8.1 now will be the kind of features not available. "Hey Cortana", which requires special hardware, won't be available for all devices.
Audio equalizer not available for 512MB devices.
As far as "moving around the keyboard", that is not meant for "smaller screen" and will have nothing to do with processing power or memory footprint. It's a matter of larger screens have that need in order to enable left/right handed one-handed operation.
There will be certain applications that require 1GB, just like now.