iPods and H.264 - Together Again for the First Time

In a rather circuitous fashion, I just realized a fairly significant change to the iPod's tech specs. I've been considering switching over my personal video collection from MPEG-4 to H.264, but part of what was holding me back was getting .mp4 and .mov based H.264 to work in my Windows based HTPC. I finally worked that out (thanks to the QT Alternative) and then I remembered the other barrier. H.264 files can be no bigger than 480x480 to play on an iPod, forever denying me my lofty goal of having one media file that can be played everywhere I want to play it.

"But wait!" I hear you saying. "Aren't the movies newly available from the iTunes Music Store 640x480?" Yes indeed they are. And lo and behold, the iPod Specs page now declares that iPods can indeed now play 640x480. What's more, I assume that the recent firmware update to 5G iPods releases that ability on all 5G iPods.

I makes me wonder though. If the 5G iPod has always been capable of this, why in the world did they cripple it in the first place? To what end? And moreover, why didn't they make a bigger deal out of this in the presentation.

Edit: The answer to the last question is, of course, to not draw attention to the initial crippling.