Yeah the lack of AF is a major disappointment and the quality of the camera will be terrible. It's OK for Facetime and that's about it. The video quality is passable in good lighting but photos? urg. It's probably something Apple gladly sacrificed to get the thin profile while maintaining the margin since they get double bonus from using the same cameras for the iPod as well.
There's not enough space to add the autofocus feature. It would require the iPad to be thicker, as the lens assembly would have to expand and contract to accomplish this. Also, without optical zoom, there's no real camera functionality, except as a last resort quick snap.
Digital Zoom stinks, unless the sensor has enough resolution to act as a 'zoom'; this is something that is usually useful with video only (which is relatively taken at a lower resolution), as most of us take photos at the highest resolution available.
Any other software based digital zoom would render an image with noise artifacts in it.