Yes, well, looks like u uncovered an error in the ars technica article (...and did I mention it was a pity that the small number of sources may themselves contain mistakes.... think about the mistakes that would not be so obvious and then every webpage would parrot the single source resulting in rewriting history)
EDIT: Here is another page which gives further information - there used to be some similar english info that also said they were working in 1986 to design chips that could do 1024x1024 res with something like 64 or 128 colours (cannot confirm this anywhere except my bad memory and it is lost in the annals of weblore....), but it was scrapped by mgmt. Hence I guess shortly afterward you see these kinds of messages in the roms saying commodore stuffed everything up.
EDIT2: And here we are my memory is not so bad. 128 colours. "already designed and working, only Commodore refused to release them": http://en.wikipedia.org/wiki/Amiga_Ranger_Chipset
But to get back on topic, does anyone know which store I might see this mag in in Oz Melb?