Well, you can make changes to existing footnotes, send the document back to iDisk and the changes remain with the document, so it is definitely a step in the right direction. I imagine the next big update will have the ability to create notes.
Personally, the most important part of the update was Apple acknowledging that footnotes are a major issue and they are working towards remedying the situation.
This looks like a great update. This update along with printing in 4.2 will dramatically increase the productivity of the iPad. The only glaring feature hole I see is support for merged cells in Numbers.
Still no internal hyperlinks (links to other slides) or presenter notes in keynote. Basic features still missing.
I realise that the app is a slimmed down version of the desktop app and this is reflected in price - but at the moment it is unusable due to lack of these basic features.