Since iPad 2 graphic co-processor is up to nine times faster than that of iPad 1, and three-four times faster than NVidea's Tegra-2 (no wonder, since PowerVR's SGX 543MP2 occupies as much area on the crystal as whole Tegra-2 SoC), iPad 2 technically is well able to handle 4x resolution and graphics comparing to iPad 1 handling 1024x768.
However, for this working better, A5 has to include 1 GB of memory, rather than just 512 MB, as it has now. But this is the only update it necessarily needs.
As recent test showed, iPad 2 handles Real Racing 2 HD 1080p TV output perfectly and without hickups. 2048x1536 is thirty percent more detailed picture than FullHD, but yet iPad 2 might handle it very well in less complex graphics than RR2HD.
More importantly, Retina resolution is needed not for games, but for basic OS UI, browsing the internet and reading books.
Whether we will see iPad 3 by this Christmas or on next March is to be seen; too early to tell.
