I've written two novels on an iPad 2 and Clamcase. It's an amazing experience, to be honest. The touchscreen works for 500-1,000 words, but beyond that gets frustrating. Firstly, you're not looking directly at the screen (and can get some strange glare). Secondly, your hands are slightly more cramped than with a keyboard (which is as wide as the iPad with bezel). Thirdly, you can't see as much of your document because the keyboard takes up half the screen.
Why not use a laptop? Well, there are things the iPad can do that laptops can't (mostly gaming, but also simply the ease and comfort of browsing on the couch). So you buy an iPad for $500 (for its strengths) and then a laptop for $1000 (for the keyboard)? Or just an iPad for $500 and $100 for a keyboard? You end up getting the best of both worlds (unless you want OS X, which is another story completely).