The problem with 1024x600 on netbooks is trying to run windowed environments on them - it's less of a problem if everything's built to run full screen. There was also the problem that Windows and Linux applications often assumed a vertical height of 768 minimum, where as most Android applications won't, since there are still plenty of lower end Android phones with lower resolutions.
On webpages, I find it's the horizontal resolution that matters the most, and 1024 is fine in my experience - after all, for vertical, a webpage is typically far longer than anyone's screen.
For video, the real limitation is not resolution, but storage space. What use is Full HD, when a 16GB tablet can't even store a single Blu-Ray quality movie? (And streaming will just use up most people's mobile data in no time.)
"cheapo chinese android phone"
I suspect the key point is chinese - if you got a cheapo chinese tablet, you could get a higher resolution too (e.g., the wonderfully named Ainol Fire).
But for most phones available with distribution in the US or UK, you're looking at either a far more expensive smartphone, or a lower resolution (e.g., 800x480, some still doing stupidly low resolutions like 480x320, and even 320x240 was around until recently).
I do agree it's a shame that so many 7" tablets are going for 1024x600, with little choice for 1280x800 or higher. But I'm also not convinced it's a "bastard" resolution.