Designed with plenty of headroom. If you were to take the first coppermines and not have them locked they would probably out overclock Durons. Its all about making money. Staying just ahead of your competition.
Processors are all made at one 'speed'. They aren't actually made at 650, 700, 750MHz and so on. AMD, or Intel, just makes the one processor type, and if it can run at the highest speed grade reliably and in the temperature specifications, they mark it at the top speed. Some processors don't run perfectly at that speed however, so they grade 'em at a lower speed and sell them at that speed. They may also be marked down to fit the sales market if they have high yields and there's a big demand for the lower end processors.
Durons are made similarly to Thunderbirds, and Thunderbirds run up to 1.2GHz right now. So Duron's can run near Thunderbird speeds since they're made similarly (most people get 1GHz-ish with them). The reason AMD doesn't release 1GHz Duron's though is that why would anyone buy a Thunderbird/Athlon Original at 700-ish MHz when they could buy a 1GHz Duron for less that performs better?
It would basically be the same if AMD only released Thunderbirds at speeds below 800 (or whatever it is the max Duron speed grade is right now) - they would all be able to run at 1.2GHz, or whatever it was they would have been graded for.