In the end, I think the price saved the iPad from being labeled "underwhelming" - the iPhone set the bar so high for this sort of thing, it's virtually impossible to top it. That was the "magical" device, the iPad just stands on its shoulders.
They're really trying to replace the laptop/netbook for people who don't really need all the functionality of a "real" computer, as well as pushing a new class of device that could easily end up in the hands of people who would be lost on a full computer, or better served by a closed device - that covers a lot of people, many of whom would not normally be in the computer market.
The $499 model, combined with a keyboard dock, would be killer in education, though they need to come up with a good clipboard manager to work around the lack of multi-tasking (think research papers - need to be able to copy and paste without constantly bouncing between browser and Pages).
I'm going to resist the iPad until next year, I would guess. My iPhone contract is up in mid-2011, and the iPad may replace the data plan and combine with a basic, probably pay-as-you-go phone, as the phone is the least-used function of my iPhone. I'd probably go with the $15 plan normally, and bump it to the $30 plan when I travel - no more $80+ cell bills, which will be welcome.
Waiting a year will also allow the iPad to replace my laptop for its only real use these days - photo storage while traveling. Whatever is left from 64GB (after apps, media, etc) probably wouldn't be enough for photos for a week (I use a DSLR, shooting RAW - 20MB+ files), but 128GB probably would be, and I think we can anticipate that being the top model in a year or so. The only question is whether the camera adapter will allow you to download and view RAW files, or only JPGs - if the latter, then it may not be able to replace my laptop as well as my iPhone.