If you have cash to burn, there's no question. Go ahead and pick up the new iPad 2. Its cameras and upgraded hardware make it the must have of the year. But if you're not made of money (and who among us is?) then the $349 refurbished original Wi-Fi iPad offers an incredible bargain, especially to anyone who also owns an iPhone and is looking for an iPad that doesn't require data service on its own.
Most users fall somewhere in between, I'm afraid. You've got to ask yourself, how important are those cameras? If you can live without them, then the original iPad offers all the horsepower and iPad elegance you need. It will run the upcoming 4.3 update without issues, and the only other sacrifices you're making are processing power and RAM.
Mind you, these things are great -- which is why I recommend the iPad 2 over the iPad 1 if you have the cash -- but they are not so life-changingly staggeringly awesome that your iPad 1 use would be significantly diminished by their absence.
For some, the question lies more in the data abilities of the unit -- Wi-Fi or 3G capable, with the cost bump and data plans that go along with that. Having a 3G iPad is particularly awesome for anyone who lacks a smart phone or whose phone does not provide hotspot support. I generally recommend the 3G model for anyone who is making their first entry into iOS and who has the funds to support the data costs.
The camera, of course, will play into FaceTime use -- which will be a big sell for many kids, teens and seniors. In addition, expect any number of augmented reality apps to use it as well (think "Star Walk" on steroids).
More memory and processing power means things will run more smoothly on the whole, even if the majority of users will not be able to tell the difference.
The bigger question is: what's next. Although the refresh cycle for iPad to iPad 2 was one year, rumors abound that the next refresh may be more significant and may hit in the fall. Spending less on your first iPad may free up funds for whenever the next great device will hit.
To sum this all up: the original iPad was an amazing device and continues to be so. Nothing in the iPad 2 negates the wonderful unicorn-pony-happiness of the first model. Unless you need the camera, the refurbished original iPad represents a really, really good price for a really, really good device.
Love & hugs,