A little shielding is enough to protect the CPU from permanent damage for a while and error correction circuits using 3-7 or more CPUs running in parallel is way cheaper, even including engineering costs, than a single CPU.
Even with the troubles, one hell of a success for $70,000.
There are satellites that are bus-sized and have antennas as large as a football field (5-6 tons and 350 foot antennas) floating around up there, those are the billion dollar ones. Their computer components are hundreds and thousands of times what consumer grade components cost, plus the satellites sometimes have stealth technologies, boosters, and extremely expensive cameras and other sensors.
The KickSat hardware was consumer grade, which was most of the reason for the low cost, the lack of sufficiently radiation hardened components also was the reason it malfunctioned according to their update.
http://en.wikipedia.org/wiki/CubeSat
http://commons.wikimedia.org/wiki/File:NROL-32b_ULA_21NOV201... carrying one large satellite
