Yeah, but it could be because they assume no one would want to do development on such small devices. Whereas it might actually be optimal to develop some iPad apps on the iPad. I should just ask the guys at Apple...
Do you really think there is good reason to develop on handhelds or do you just think that solving this problem might be a good way of unexpectedly solving other problems?
There might eventually be XCode for the iPad, but I doubt it'll come with root access. Apple doesn't want people developing apps that require root access to run, that would circumvent their entire model. Anyway I suspect the current iPad hardware would have a hard time compiling anything.
No doubt if Apple did make XCode for the iPad it would require an Apple developer license to run. What they seem very keen to avoid is having a cheap compiler or virtual machine or interpreter on the platform that lets people download code and circumvent the App Store. I doubt that they are against people developing on the platform for its own sake.
