I remember when the original iPad was introduced, I felt it was a giant iPod Touch, and there was no way I would be getting one. Then the reviews and hands on videos released, and the more I watched, the more I wanted one. I'm thinking this occured with many people lol. I loved my iPad. I used it every day for reading, web, emailing, some gaming, magazines, etc.
iPad 2 got introduced, I felt it was not a large enough upgrade, so I figured I would wait for iPad 3. Then the reviews and comparisons released, the more I watched and read, the more I wanted one, lol I am an easy sell when it comes to technology
The main reasons I upgraded were pretty simple. First and foremost, I really appreciated the physical changes. Original iPad was not ridiculously large, but the hands did grow a little fatigue after using it for a very long time. The thin form of iPad 2 absolutely makes it more comfortable to hold for longer times, the weight is a bit negligable, but the thinner definitely feels better. I was happy to get rid of the need for the Apple Case, I was not a big fan of the added bulk and those flat seams. I am loving the Magnets, and the Apple Cover. It brings me back to what I loved about the Sony Ebook Readers that always very handily made the slot for the covers, and they used the same magentic strip to keep it closed and secure.
The screens are exactly the same. And for the record, when iPad 1 came out, I had to exchange 4 to get one without significant bleed. The graphics are a little faster and more responsive. The processing and Ram upgrades do not make it FEEL miles ahead of the first one, but it does not hesitate to load up an app or iBook, or file where the first iPad sometimes took a few more seconds to do so. I have this thing with technology though that says the next upgrade Apple releases may be significant enough to make the first iPad a little more outdated where the iPad 2 may stand the test of time for a bit of a longer period, thats just my opinion of course.
So like many have asked, do you NEED the iPad 2 over 1.....no. If you like having the latest and greatest, and don't mind spending the extra hundred to have that....go for it. Sounds like your sister would be fine with the iPad 1, and you might appreciate the upgrades of the iPad 2 a little more than she might.
Good luck, let us know how it turns out.