Well, it doesn't have a JVM per se, its VM is the register based Dalvik, which requires a translation phase to convert compiled Java/whatever bytecode to it.
I was aware of that, but if they can include a seperate Flash VM, then they can include a seperate Java VM just as easily, if not more so.
It also raises my other often unaswered question about Android. At what point are they going to just use a standard JavaVM? The two main theories are A) that it was a licensing dodge because (like Adobe Flash did till recently) Sun gave Java away on the desktop and charged for mobile and set-top boxes, or B) it was necessary to get performance on low power hardware.
I didn't believe the latter reason at the time, and it's only getting less true as phones get better processors and people talk about putting it on tablets and netbooks. The former reason is apparently toast since Oracle has announced the merging of Java ME and SE which I'm guessing includes licensing terms.
You're ignoring that Moore's law doesn't apply to batteries. It's not so much the crunch required (although non-Apple products have suffered here in comparison), it's the battery drain.
I know that was a design goal, e.g. the bytecodes after translation from JVM to Dalvik are smaller. I also seem to remember hearing that not all of a JVM's library is supplied with Dalvik.
Also, hasn't Java ME stagnated? I.e. it's stuck in at Java 1.3 (which Oracle has promised to address).