You have to be the baaa baaa baaaiest of sheep to buy the Smart Cover, but Apple will sell tons. $39 and what does it really do? It doesn't protect the iPad at all against even the faintest of drops, it doesn't even protect against scratches and knicks. People are amazed because it's got magnets as-if magnets are some new fangled technology that haven't be around since history began. I don't get it, but it is genius of Apple to get people to fork over $40. If the emperor had a new case this would be it.
I'll keep using my current iPad case (sure it will be loose) until iPad 2 cases worth $40-50 show up. I've seen a lot of nice designs from Macally, Incipio, Speck, etc., etc. that actually protect the case -- and if I'm going to spend $ to cover up the iPad it's solely to protect it, not to decorate it w/ a colored piece of plastic.