I have no trouble seeing the display in bright sunlight. Are you sure it's turned up full bright? Keep in mind too that you will get some slight shading in the cockpit, between the tinting of the skylight, and the overhang of the instrument panel. Try it in the plane, inflight, and with the display full bright. Keep in mind though, the iPad display is quite glossy, and that could cause a problem, particularly with a stationary mounting. If you get your brightness issue resolved, try adding a stick-on non-glare screen protector to cut down on reflections.

As for the FAA. . . they don't care, as long as you have the required engine instruments (in some form), and a whisky compass.