First, Paragraft treats each line of text as a separate object. This means that you can quickly drag paragraphs and list items around to reorder them. It's the app's most prominent feature, but not nearly the coolest.
Paragraft also slightly modifies the syntax of Markdown in areas where it's less than convenient on an iOS keyboard. Ordered lists don't require a delimiter after the number. Three consecutive hyphens on their own line make a horizontal rule (normally you'd need spaces between them, or more of them). It's the little things. It might be slightly non-standard in these areas, and be less compatible with other apps, but if you're writing an email or a quick post and converting to HTML within the app, these are big time-savers. You don't have to use them; it works as well with stricter syntax.
Here's my favorite thing -- the part that really has me thinking: swiping right and left on a line turns it into a headline (adds hash marks on both sides) and modifies its level with each swipe. Gesture-based editing opens up a lot of possibilities.
The export options are pretty complete. Send a rich text email, send plain Markdown text, send a PDF with text attached, stick a PDF or raw Markdown in your Dropbox... it's quite a list. It lacks a raw HTML export, but my Markdown always ends up on my computer before it goes anywhere, so I really want my plain text anyway.
The document organization is nice, too, with an easy-to use (though not terribly pretty) tagging interface and multiple sort options and views. I don't have many documents in it yet, but I'm not concerned about long-term organization.
Next, there are some great shortcuts that emulate something you might do in TextExpander. Two q's in quick succession make an asterisk (italics and bullet list items). Two x's make a double asterisk (bold). Typing q and Enter in quick succession gives you a hard line break within a paragraph. All of this adds up to not needing an extra row of keys on your keyboard, which I'm finding is really nice. Now, if the developer adds TextExpander support, we could fill in the blanks. Despite the innovations, there are plenty of blanks to be filled.
Paragraft doesn't have any built-in linking tools. To be a complete blogging tool, I would need it to have some means of quickly linking text. As I mentioned earlier, though, I use my iPad for sketching posts but rarely for finishing or posting them. I leave marks in my text to remind me what needs linking when I bring it back to my computer. If Paragraft is going to overlook anything for the moment, this is actually it for me. I have the same approach to image tools, built-in web browsers and other niceties. They're great, and requisite for completing a blog post entirely on your iPhone or iPad, but not a must-have in my workflow.
Paragraft's interface, outside of text editing, can be a little clumsy. In some areas it breaks tradition in ways that are kind of neat (pull down the document list to create a new document), and in others it seems wrong. For example, you switch preview and edit modes by tapping the title, but you have to go to another page to actually edit the title. There are multiple ways to export your text and they're found on multiple screens. The icons don't always make sense. It's a little bit utilitarian, aesthetically (read: ugly). Still, if you can get past these things, this is a great writing tool.
While Paragraft might not be the ultimate solution for every Markdown-lover, its potential has me pretty excited about this genre of apps moving forward. You can pick up Paragraft for just US$0.99 on the App Store. If you write on your iOS device, I highly recommend giving it a try.