Love my current 64 gig wifi IPad, but they can certainly make improvements.
Hardware
Cameras. Rear facing for general snapshot use, and a front mounted one that can be properly used with apps like Skype. I'm away in hotels a fair bit on business, and always use Skype on the notebook to call back home, but using the iPad would be soooooo much easier.
Stereo speakers placed either side of the unit to give better separation.
USB socket is a definate must have.
HDMI out for connecting to the tv without having to use a dock connector ( and higher resolution and sound).
SD card slot built in for downloading images from a camera as well as using it to increase the storage capacity, or just transferring files without a PC etc.
3G built in as standard without having to pay another £100 for it.
Dock connectors on bottom and one side so the iPad can be docket and charged in a proper dock in landscape mode as well as portrait.
Software
Better organisation of images and allowing user definable folder names and viewing of EXIF data.
Proper organisation of music videos (like the IPod and iPhone have had for some time now) rather than the stupid way of cataloging them alphabetically rather than under artist name.
Tabbed safari app to make switching between web pages a one touch affair ( and rather than using 3rd party browser apps).