Better display + upgraded processor (w/more memory).
Just getting a better display, without upgrading the processor is about useless, because the overall performance hit of driving all those pixels from app to screen would bring the iPad to a crawl.
I really do think though that if there is a new iPad released this year, it would likely be a new form factor as opposed to a refresh/upgrade of the current iPad2.
As much as Steve said 'No" to the 7" form factor, it makes sense in a number of ways. That's what I think we'll see. Unless there's an agreement to come out with a 4G version of the iPad2 for the carriers, which would make sense for a release in the middle of the current iPad release cycle.
Anyway, I'm an every other cycle buyer, so I'm planning to go from my current iPad (original) to whatever the next iteration of the product line is. I think the iPad2 was a significant update, and I don't think the next version will be as revolutionary as opposed to evolutionary for the product line.