Thanks everyone! I've always setup from scratch (habit from getting and setting up a new mac) but all those apps!! Even the old ones I don't use anymore get synced on the first one and it's a pain to manually delete / move / etc.
Yep, what they said above -- worked fine for me. I did have two hiccups though. I had to upgrade to the latest version of iTunes. Before I did that, it would not list my iPad 1 backup as an option for restoring to the iPad 2. It also did not remember all the folders of apps I created. Bit of a pain.
Everything transferred just fine with the following exceptions:
Wifi and email settings - no big deal to set up
2 games - Bakery Story and Restaurant Story, lost all progress
Storm 8 games, like the ones mentioned above, are device specific