Lower res for retro style game possible? Up performance?

Hey guys question about resolution. If making a retro style game, with pixelated graphics, rather than having large images of pixelated characters, is it possible to lower the resolution of a game and have it still work full screen on the iphone? Like instead of 320p move it down to 160? Is this possible, and would it significantly increase performance? I figure smaller images to load and less pixels to check for collisions. Has anyone done this?
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