I recently upgraded from iPad1 to iPad2. I much prefer the 2.

There are a couple of processor-intensive games that I like playing. Here I notice that the 2 is smoother. But processor speed is frankly, a non-issue for me. It's nice to have more horsepower but it's not necessary for the vast majority of apps I've come across.

The biggest thing for me is the weight. I use my iPad to read books a lot. After a while, holding iPad1 feels heavy. I've not had that issue with iPad2. The 2 is remarkably thinner and lighter and it just works better when holding it for a few hours at a stretch.

The cameras are a nice to have for Skype.

The other nice thing about the 2 is the way it works with Apple's cover. They did a really good job hiding magnets in the iPad so taking the cover off and putting it back on is incredibly easy. My iPad1 by contrast was stuffed away in the original Apple case which did a great job protecting the unit, but sadly entombed it inside a rubbery microfibre case. With iPad2 + the cover, I get to feel the "naked" iPad more which is nice.

Overall - can't go wrong with either iPad1 or 2. But for me the weight difference with 2 is worth a few more $$$.