First off you were already previously trying to do android on the pandora. So the SOC shouldn't be hard to figure out.
I'd personally do the new pandaboard based system. aka the new omap 4460(if I remember right) SOC. It's essentially an upgraded omap3 that youhave in the 1ghz units atm. The instruction set is obviously a bit newer etc, but the power management are already in your kernel, and they have dev boards for them so new developers could quickly/easily get those to do the testing of their programs.
So basically you get angstrom linux(like you have already), plus a newer version of android supported on the SOC. Plus you've already got people used to how the powervr GPUs work. The clock speed increase isn't obviously anything insane. Only ~500mhz more per core, but there's a larger I/D l1 cache, more registers, and a much larger l2 cache. Plus it's got the DSP(again which I know isn't currently being used). And it has an onboard processor to decode video.
Next up about the full-size sd cards. Yes absolutely, but internally I'd move towards a micro-sd card instead of nand-flash on the new pandora. Because that'll let you salvage more units and thus be able to replace the thing more easily if the nand flash dies in the sd card vs if it was on the POP. As far as the ram goes, I'd go no lower than 1GB since that's obviously the only sane thing with it since it's a mini computer and more ram is _always_ better. As far as the screen? I think the current one looks to be perfectly fine if you do go bigger then no more than 1280x720 and even then is a useless cost. Capacitive is fine, but you may want to try to get multi-touch capacitive if it's going to do real android on it.
I haven't held one but I've seen them compared to the DSes and a tiny bit bigger is fine.
Anyway yeah, omap4460 is where I'd go for the SOC replace internal NAND with a class 10 uSD card. Any size will do, and that's because a) there's dev boards already out there for them. ( they already have angstrom/android 4.2 on it.) your kernel already has the power management stuff in it for how TI does its stuff.
Edit: One last thing, the default clock is 1.2ghz but that was only for earlier units as they weren't capable of hitting 1.5ghz the later ones should be able to do so. So it's anywhere from 1.2-1.5ghz in terms of raw clock speed. It should be like the pandora reaching 850mhz up from 600mhz. These cpus are able to hit 1.5ghz each.