The frame rate will be limited due to the memory framebuffer <-> separate LCD controller bandwidth issue, but this does not affect what the PowerVR does (as it will just render to the main memory framebuffer). Certainly if you want something to run faster you'll want to render to a smaller part of the screen and use the LCD controller features to expand that, etc., but that's not the same thing.

I think the reason it wasn't supported to begin with was more to do with the buginess of the driver, or at least that's what I heard...