Of course dedicated hardware is faster. It is also very inflexible. You cannot clone your DB box to 10 more instances wishing minutes. You cannot detach and reattach volumes withing minutes. You cannot resize the box to 2x size withing minutes. You cannot move it to a different VLAN within minutes. AWS is not the speediest, but it certainly is flexible.
According to your comments though, you'd have been just as well served with a regular VPS at a regular VPS host - you wouldn't have wasted time to found out RDS is slow, and you wouldn't have issues with slower than usual disk IO on EBS.
My point about physical was just another common optimisation for performance critical DB servers, you could probably get close to bare metal speed with the flexibility of virtualised by using a "single VM on hardware" model that some providers offer now.
