I think the reaction is largely over the perceived short lifespan of the hardware in relation to supported software updates available to it, which in this instance favors poorly against Apple generally supplying software updates more than two years after a phone is released.
This phone is substantially younger (by six months) than Apple's oldest supported model, for one thing. And since the 3GS will be sold on an ongoing basis, it'll likely enjoy updates beyond 5.0, as well.
But the last official update for the 3G turned it into a dog. I don't think any company is blameless, here, but I'm far more disappointed to see Google doing it. Linux still runs on a 386, last time I checked.
FWIW, many report that iOS5 actually makes the 3GS faster. Anandtech ran some benchmarks that show the 3GS on 5.0 being faster than the iPhone 4 on 4.3 at many tasks!
I'm not convinced that you could run a 3.0 kernel image on a 386 without running out of RAM pretty soon, even if you cut it down to something pretty minimal. I haven't found any sources where anyone's actually installed modern Linux on one - they all seem to have used ancient distros because support actually vanished some time back (see eg. here: http://hackaday.com/2011/08/12/installing-linux-on-a-386-lap...).
I stand corrected, but you have my curiosity up. Nevertheless, the "decline" of hardware in the face of software advancement in phones strikes me as awfully rapid. Is the Nexus One really so underpowered that ICS couldn't be made to accommodate it?
Well, besides how much easier it will be for third parties to add ICS to Nexus One.