Most LCDs aren't very readable in direct sunlight anyway, and iPad isn't an exception in my opinion, the transflection properties aren't strong (I think good transflection sacrifices other desirable properties) and the backlight just can't compete with sunlight. Maybe you get a 2:1 contrast ratio if you're lucky. I wouldn't read a book in direct sunlight either, it's too hot out and the pages are lit way too brightly. Get in the shade, put up a beach umbrella, whatever.
In a rough calculation, I think the iPad would be absorbing about 60 watts in direct sunlight, which is about twice the heat output of an average laptop computer in typical operation (not maxed out, but maybe not completely idle either). I can see how the iPad can get hot. It would not surprise me if direct sunlight on the front surface is enough to take ambient temperature of 80 F and make the iPad 95 F or higher, and trip the temperature alarm.