Apple doesn't care about the low-end competition any more than they cared about competing with Dell. That's not the market they're after. There's no margin in that market and as we all know, as far as hardware is concerned, Apple only works at high margin. Barnes & Noble and Amazon are selling their devices as a loss leader to gain market share and to sell eBooks. Apple does the opposite: they break slightly better than even on the iTunes store in order to make their margins on hardware.
Although Apple has occassionally reduced prices, most of the time they simply provide more value (more memory, bigger hard drive, better monitor, whatever) for the same price as the previous model. Having said that, if they have large inventory of the previous model, they will discount that, but Apple keeps such tight control over "just in time" inventory, it's usually not the case.
Apple does care about the low end competition, that's why they still offer the iPhone 3GS. Regardless if Apple does release 2 iPads this year I see the iPad 2 being the iPad version of the 3GS.
Scenario 1: One iPad this year ( iPad 3 )
iPad 2 stays in production for $100 less, $400 for base 16GB Model with Wifi
iPad 3 with A6 and all the different form factors, GSM/CDMA maybe LTE, better cameras and Retina
Scenario 2: Two new iPads this year ( iPad 2S feb/march, iPad 3 oct/nov)
iPad 2 stays in production for $100 less, $400 for base 16GB Model with Wifi in feb/march, come oct/nov iPad 2 will be $300 for holiday season.
iPad 2S with A5 chip, retina, all form factors GSM/CDMA, and upgraded cameras, etc. starting at $500, come oct/nov price drop to $400.
iPad 3 with retina , all form factors GSM/CDMA/LTE and upgraded cameras etc. $500
I think Scenario 2 could be a strong possibility if the A6 chip is not released in the new iPad come feb/march. Apple will continue to make their profit margins, I think it is getting cheaper for Apple to get components and if Samsung made a factory in Texas to make the A5 chip, I think Apple has big plans for that chip still. Originally the A5 was described to have enough power to drive retina on the iPad, and with rumors of the Apple Television, I think Apple may use the A5 in that two.