I'd imagine the 3D stuff involved in those two features is pretty hefty on the system.

Flyby I can see limiting to the devices with the nicer GPU but the lack of turn-by-turn on older devices seems odd. My Droid had 3D turn-by-turn navigation when it was released and that was in October of 2009.

I suspect Apple just didn't want to compromise on how detailed the 3D was so they left older devices out.

The turn by turn could heavily integrated with the Siri functionality, which is only on the 4S. Total guess but it seems to make some sense.

Turn-by-turn navigation requires 3D hardware?

There were 99$ Windows Mobile navigators years ago that offered a display as seen on the linked screenshot. This wireframe-esque display is hardly GPU intensive.

(Not to mention that all of this is probably limited to few select regions, just like with the 99$ GPS..)

The GPS app I bought does offline turn-by-turn just fine on my iPhone 4. Apple can't pull off the same?