developing a cubesat reportedly runs from $25-50k
Yeah in engineers salaries, solar panels, machining work, testing, etc. The cost of the computer is only a part of that.
Cell phones are perfect because they include a compass, gyro, camera, etc. A LOT more than just an ARM SoC.
The hardware in a phone doesn't cost anywhere near $25k. In fact buying the parts separately is probably cheaper than most phones (because you can miss out the screen, 3G, GPS, wifi, etc. on a satellite). Plus if you build it yourself you will save weight and have more flexibility. Something like gumstix combined with and one of invensense's new IMU chips would be much better than an Android phone. If you're spending $40k on the launch, why pinch pennies on the hardware?
The area where android phones really *are* great is UAVs! You basically just take a cheap android phone. Add an IMU, and PWM output board and you're done, and have 3G, GPS, wifi, cameras, for very cheap (£50 or less).