Looking around the App Store, I found an interesting alternative with a similar feature set, Laminar. It runs on the iPad 1 and 2, and best of all, it can load and output higher resolution files.
Laminar is currently on sale for US$0.99. It has 60 built-in features, supports layers and masks, and has a selection of frames and borders. There are also one-touch filters for quick auto adjustments, as well as auto white balance and Gamma correction. Of course there are curves, shadow and highlight adjustment, noise reduction and crop tools, as well as a feature that lets you add text in a variety of fonts. You can email your photos, or send them to Twitter, Facebook, Dropbox or set up an FTP destination.
I've used the app for a few hours and found it intuitive, and there is some help built in. The GUI isn't typical, but it doesn't take long to adjust to it. I found I could really do just about the same things to my images I could do in Photoshop Touch, although the controls and screen in PS are prettier.
I asked the developer about file sizes, and he said the app can output roughly 15 MP images on the iPad 2, and 3-4 MP images on the iPad 1 due to memory constraints. There is no limitation on the size of file imports.
In use, I found the operation of filters and transforms noticeably slower than Photoshop Touch could do them, but I was working with substantially bigger files. Rendering a wooden frame on my iPad 2 took just under a minute. It's a heavy load for the iPad CPU.
Having said all that, I do like the program, and at $0.99 it's a steal for a full-featured image editor. You can find some demo videos and more information at the website for the app. I also suggest you get a look at Snapseed and Photogene which are also capable editors. I think Laminar is an interesting alternative to Photoshop Touch. It doesn't have the magic 'Photoshop' name, but it is worthy of your consideration.
Here are some screen shots I grabbed while using the app on some of my images.