The propeller architecture does not lend itself to interfacing with DRAM in a way which would support fast (and deterministic) access times, so the Coyote-1 uses SRAM. My design goal was to provide enough memory to achieve KT Tunstall style delay loops, and 1.5MB was enough to achieve that. The memory is both the largest consumer of board real estate in the design (from a chip standpoint), and the largest contributor to cost (at the PCB components level), so 1.5MB ended up being a good "cross over" point. In fact, the original design was for 1MB but I put the pads down for a third 512K device which I had originally intended to just populate on my own personal unit, and then at the last minute I decided to give everyone the full 1.5MB to play with.
Guitar audio can really get away with a 22KHz sample rate, and a 16 bit sample resolution, which would allow for (512 * 3 * 1024) / (22000 * 2) = 35.7 Seconds of loop audio. The current implementation of the "Tunstuff" effect stores 16 bit samples at 44Khz, so it has a 17.8 second loop length.