I'd go with the iPad 2 with 16GB, but that's because I have no desire to load media on my iPad (I have an iPhone for that). I have 11GB free on my 16GB iPad 2. If you want to keep a large music (or especially video) collection on the iPad, 16GB can fill up pretty quickly. Lots of cloud services will let you stream media though (amazon, mobileMe, DropBox, ZumoDrive, etc), so you have options beyond the local storage anyway.
The iPad 2 is more capable, but I haven't used any apps that that aren't compatible with both versions of iPad. The most notable one I can think of is iMovie. Maybe if you have some ideas of apps you would like to use, you can check the app store to see if any are iPad 2 only.
Do the cameras on the iPad 2 have any meaning for you? FaceTime seems like it should be a killer app (which would be iPad2 only), but I've yet to use it.
It all depends on what you want to do with the iPad, and how you balance $100 against Storage Space and against Added Features.