@Just4Fun
There are 2 factors that led up to the 1MB upload limit to AppSync:
1) When we first built AppSync we ran some test cases and found naive users doing silly things like inserting 1+ Mb images into their bloated designs and then complaining about slow performance… This led us to impose a 1Mb limit to try and get developers to learn to create lean designs.
2) the cloud upload facility used by AppSync requires that uploaded apps be completed within 30 secs. As apps get larger the probability increases that on some slow networks the upload will timeout… The 1Mb limit seems to work well in most geographic settings.
Because we have had a number of requests to extend the 1Mb limit we are reevaluating our cloud platform with the requirement that AppSync can support a larger upload and download payloads and timeframes. In the short term, if the bulk of your app design is contributed by images try using an image compression tool such as http://optipng.sourceforge.net/