You can make it work by adding a wrapping div with overflow: auto;
and -webkit-overflow-scrolling:touch;
.
Here’s your example with it: http://jsfiddle.net/R3PKB/7/
According to previous questions on SO it’s a bug since iOS 4. I found more info here:
https://stackoverflow.com/a/6721310/1047398
iframe on iOS (iPad) content cropping issue