A few further thoughts after playing with it some more...
The virtual instruments are actually really bloody good.

The virtual rock guitar sounds great, and you can even do palm-muting! There's two modes - one where it gives you a set of chords based on the key of the song that you specify, and you can "strum" them, or pluck individual strings, and a direct notes mode where you "tap" the notes on the fingerboard, a bit like playing a Stick.
On the bass side, there's a virtual Precision, a virtual Hofner (neither of which sound particularly good, alas), and, most interestingly, a virtual double bass - complete with interactive fretless fingerboard! It also sounds pretty authentic. On the drums side, there's the onscreen drumkit which is smart and very usable, but there's also a "smart drums" mode where you place drum patterns on a matrix and it generates beats for you. Very clever. There's also lots of nice soft synths, with knobs where you can adjust the filters, etc on the fly, and a very nice "rock organ", complete with drawbars. These are all features the desktop version of GarageBand doesn't have...
Recording directly into it using the iRig was easy, I didn't notice any latency and the resulting sound was good. The way it's set up, you record a song one "part" at a time, which you can set up to be 8 bars, 4 bars, etc, then you string the whole lot together afterwards. I haven't run into any limitations with using it on the old iPad yet either - I think using it on the iPad 2 allows more live effects and more simultaneous tracks, but just laying down 4 or 5 tracks with minimal effects works just fine on the original iPad.
Basically, so far I love it.

Going to play with it some more over the weekend.