PDF really isn't that "compatible" with eBooks. Text needs to be able to reflow, arbitrarily break for pages, and not rely much on specific presentation. PDF is designed to look the same on screen as it will when you print out it, so it's at odds with the desirable eBook features.
Actually, PDF can include structure tags that allow it to re-flow the text when the display size changes. The problem is that this tagging feature is a somewhat new addition to the PDF standard and is not supported by most document creation utilities.
The kindle is roughly the size of a paperback... I can't imagine there would be much difficulty in making a pdf display in that size (and I routinely print pdfs at 2 pages per page side).
Many PDFs are made in letter size, so they would get scaled down to the point of unreadability on the Kindle screen. I don't think it's fair to compare the Kindle screen to 2-up paper, since printers have much higher resolution.
