I've had good experiences with refurbs...
Here's basically way an Apple refurb is:
* Start with any brand new Apple product
* open it
* have a reburb specialist double-check every component for proper functionality and every surface for near-perfect cosmetics -- defective or non-near-perfect parts are replaced so that the device is functionally perfect and cosmetically near-perfect.
* lop a significant chunk off the price
In other words, after you have paid for and used your device for a few days, there is literally no difference between a new Apple product and a refurb one except the refurb might be a little more reliable because it's been through an extra QA process.
I think the warranty and return policy is the same, but double-check that -- maybe I am misremembering since I have not ever had to put it to the test.
EDIT: one more thing:
watch out - sometimes refurb prices make no sense. E.g., I just noticed that a 1st gen 16GB black wifi iPad is $399 refurb, while the same second gen is $349... Considering a NEW iPad 2 with the same specs is $399, the refurb price for the orignial makes no sense. (I don't think Apple is really trying to screw people -- I just don't think they pay a lot of attention to their refurb prices and it takes them a long time to update them in response to, e.g., new product releases.
They also ship the device in plain refurb packaging (e.g., brown box, at least in my experience) and it is harder to find exactly what you want.