The main difference that strikes me is that the smart cover is just a screen protector, whereas the Apple case for the iPad1 provides protection from minor knocks to the whole device.
When I take my iPad1 with me beyond the house it always travels in another case as well as the Apple case. However when in the house it only has the Apple case. Not sure I would feel as happy with an iPad2 in only the smart cover.
Of course I cannot justify spending £700 less than a year ago on an iPad1 and then discarding that and spending the same again just because a new version is released - so the point is moot really. I might be a little different if I lived in the US and they were on sale for half that price.
The thing that worries me is that the same thing will happen with the iPad as happened with the iPhone - Apple will release an update to iOS which deliberately ruins the old model, in the hope of forcing people to buy the new one.
On the other hand, there is no doubt that if I had not bought an iPad1 I would be very happy to get an iPad2. This contrasts with the iPhone - I don't even like the look of the iPhone4, even if my iPhone3G is now much slower than it was with iOS3. However, having tried an Android I would probably still buy an iPhone, even if it had to be an iPhone4