Hi David,
It's good to read a post on the iPad that addresses functionality!
I've used a tabletPC in exactly the way you describe, since 2004 and I highly recommend it! It does indeed save many paper draft rounds but I wouldn't want to do it on something smaller than my current, 12in, screen.  I 'print' my (or my clients') drafts to the Journal application, which essentially gives me a picture of it which I can then use my stylus to red pen all over. For my own work, I like that I can analyse it without the temptation to go in and make changes before I've gone over the whole draft, as I invariably do if I'm editing in my WP app.
 I also use my tablet as an ereader because it has a full Vista OS (soon to be win7) and I have all the various store's software installed and I have full net resources.  I'm on my 2nd tablet PC, now, my first having died update death, last year (it was 6years old, though!) and I wouldn't mind an even smaller, lighter tablet which I could REALLY throw in my bag to replace paper notebooks but the functionality would have to be there - iPad was never going to have that, and now it looks like the Courier is not going to have a full O.S. either... All very disappointing when you know the tech exists!!