I did an experiment using my iPad for my two hours of daily reading of the Internet. It didn't go great, mostly because of UI limitations. But it's definitely workable.
I've got a daily list of things I read online. RSS feeds in Google Reader, a few community sites like Metafilter and the AOPA forums, Twitter and Facebook, and some random image blogs (notably Chan4Chan NSFW). Doing a full read takes an hour or two and I consider it time well spent. Reading those same sites a second, third, fifth time the same day still takes about an hour and becomes procrastination. So I thought I'd shift that work to my iPad, leave my desktop for real work.
The good things.. It's nice having the iPad in your lap in a comfy chair. The touch scrolling and navigation is comfortable for casual reading. The display is beautiful; bright, high enough resolution, and generally fast enough except for the monster chan4chan page.
The main bad thing is the single-tasking user interface of iOS. I'm surprised how much multitasking I do when reading the net. Metafilter opens up into a forest of 20 tabs, sometimes several new windows as I explore sidelines. Google Reader URLs get copied and pasted into Delicious for linkblogging. Forum responses get written, sometimes over 30 minutes as I research related things. Videos are watched in the background. Task switching is possible on the iPad but it's awkward. App switching is clumsy and cut and paste is a real chore.
In general I like the idea of single-tasking interface. But my random daily reading is something that seems best suited to a multitasking windowed UI. What I really need is to be able to write code on my iPad. Only that too is multitasking: an editor, the software itself, docs, version control.
The iPad is best at single task focus, like games or videos or books. (Related: I have a Kindle for sale.) It also seems to work better with new custom apps like Reeder or Twitter; traditional web sites like Metafilter don't quite fit the iPad as well.