All new camera phones should have at least a 2 megapixel camera, period. This phone is pretty cool looking in my opinion, but I won't even consider a phone with a weak camera. Hopefully LG will have an updated one with a 3.2 mp cam, then maybe I'd be interested.
By looking at the specs, I would assume that this phone is an entry level handset, which does not need to have a 2mp camera. This phone is not meant to be expensive, and adding higher end camera's into this phone will jack up the price. Since this phone is not targeted at those who want to pay a lot for a phone, putting an expensive camera into it will defeat the purpose of the lower price point.
The more you pack into a phone, the more it will cost and the more exclusive it will become.
What if this phone is priced below the $150 mark? There are people out there who do not want to pay that much for a handset. A large amount of consumers want free phones, or phones that will cost under $100. These are the phones with smaller cameras.