I'm not surprised. It has a very slow processor, and for this kind of processing you need a lot of power. In fact, I think the (original?) developer of Word Lens said he first made it in Assembly to make it fast enough even for an iPhone 4.

Plus, your phone is also on the ARMv6 architecture, and for the kind of optimization they need to do, they didn't want to bother with that older architecture.

For the record right now I have a phone with a similar processor as well, but planning on switching to a Nexus this fall.