[Desire Q&A, Help & Troubleshooting] nawoa:
iPhone and Galaxy S share the same CPU/GPU chip, and as you say, yes it probably leverages the GPU to help encode the data more efficiently. Even if not, it's a more efficient chip which doesn't just mean it's smaller and uses less battery, but it's actually more powerful despite running at the same clock speed.

For example, I had an experience when I was upgrading my computer last year, going from a 65nm CPU to a 45nm CPU with identical architecture, cache, etc. Running at the same clock speed I get ~20% or more of a performance boost just due to the better efficiency.

I can't say how well that carries over to this situation since I'm sure there are more improvements in the transition from "snapdragon" to "hummingbird" than just the newer manufacturing process and more powerful GPU, but you can be sure the CPU gains a significant speed advantage from the lower node even before whatever other enhancements have been made.

"Hardware not capable? 1Ghz not fast enough?

Nexus one 720p @27fps!!!"

I'm not even going to look. 27 FPS isn't any kind of standard and if indeed that framerate is being achieved it's because there is extremely good lighting. Please introduce me to the world you live in where everyone and everything is always in ideal studio lighting... Aside from that I know without clicking the link that it will be terrible-looking.

"But if it's possible to record in lower resolution and better framerate, then desire would have been a better choice than a second hand nexus one."

I don't mean to belittle you but doesn't it go without saying that there is a lower-resolution video mode available when 720p is only just being unlocked in the most recent firmware? Whatever the case, N1 and Desire have identical hardware, if anything you might have a screen you like better than if you bought a Desire today.

Anyway, yes in my opinion you'd normally want to record at a lower resolution. I haven't done a thorough quality comparison but I'd guess you're not going to get much benefit from going above 320x240 for video. The truth is harsh, isn't it? Probably no harm in using the highest image size but it's not going to deliver miracles, especially considering the shutter lag and lack of any kind of image stabilization system.

But on the upside, your videos will have a smaller filesize, the framerate will stay consistent (at least if there is adequate lighting), and as I said earlier there is absolutely no real-world quality difference except that you'll get less battery usage and video noise when recording and playing back lower-resolution video.

Keep in mind, I bought a Desire and I love it. I even think the camera and video is fine. Just keep your expectations reasonable and realize that you need an actual camera to take good pictures/video. It's for Youtube, Facebook, and that kind of thing, not wedding photos.

Canon HF100 (IIRC) is a solid prosumer choice, or if you want something more compact but still versatile you might look at the Sony DSC-TX5, which is very durable and even waterproof to boot. It was just replaced with a newer (but not significantly different) version, so you can get it pretty cheap too. It offers quite good still and video quality (REAL 720p) considering it's like 15mm thick and even has some voodoo real 5x optical zoom system despite not having a moving lens on the front.