I think the reliance on Java has little or nothing to do with Android's overall performance.
I suspect the real difference is that Google has chosen to spend its time and energy in other places (e.g. setting up the open-source project, supporting a wide range of devices, creating flexible and complete developer APIs, etc.) rather than optimizing aggressively for performance from the start. I'd bet all of the interesting bottlenecks (e.g. browser rendering) are native code anyway and the Cyanogen ROMs clearly demonstrate that Google has left plenty of performance on the table so far. Given the pace of Android updates, I expect that to change in the not-too-distant future.
I suspect the real difference is that Google has chosen to spend its time and energy in other places (e.g. setting up the open-source project, supporting a wide range of devices, creating flexible and complete developer APIs, etc.) rather than optimizing aggressively for performance from the start. I'd bet all of the interesting bottlenecks (e.g. browser rendering) are native code anyway and the Cyanogen ROMs clearly demonstrate that Google has left plenty of performance on the table so far. Given the pace of Android updates, I expect that to change in the not-too-distant future.