My problem with magazines on the iPad is simply, how does digital distribution overcome the thing that's killed magazines in the first place? Specifically, by the time you assemble a magazine's worth of content, its already out of date. And if you're going to have live updates, then isn't this just a web site that you pay for by the unit?
Agreed, but I also think you're only thinking about news magazines, which are a tiny fragment of the market. And there's no reason to say that with a subscription model in place, that a magazine couldn't tweak their schedule. Perhaps they could release late-breaking commentary or special features?
Magazines are challenged because of lowered discretionary spending due to economic factors and declining ad revenue as the industry has been fractured by web, print, tv, billboards, etc.
Non-sequitur:
There are a whole slew of non-news but news related magazines I'd love to see in a print-like format on the iPad: The Nation, The Economist, Harper's, The New Yorker, The New York Review of Books. These magazines, although temporal, are still relevant months after issue.