With iOS 4.2, the iPad now supports threaded email and a unified inbox. Similar to Gmail, threaded email on the iPad lets users group received emails into a conversational format. You can then scroll through each individually, in order. The biggest problem is that it can require more clicks, and doesn't add the emails you have sent into the conversation. The result is a one-sided email conversation that doesn't compete with the threaded email Google offers to Android devices. (In fact, serious Gmail users will be better off to use the browser-based version of Gmail, which Google has given amazing capabilities through the use of HTML5.)
The unified inbox will lump all the email from each email account on the iPad into one master inbox. This makes it easier to scan through multiple accounts at once. Another bonus is the ability to sync notes between the iPad and your email. The option to do so is found in Apple's iTunes software.
The iPad also has the improved spell check software. The software offers several options when it can't figure out what a user is attempting to type. Giving users this extra choice leads to fewer corrections later.
There's no doubt that iOS 4.2 greatly improves the functionality of the iPad. The addition of folders, multitasking and refreshed email all go a long way toward making the iPad a more robust device. AirPlay, AirPrint, Find My iPad and the Game Center take the iPad to the next level, making it genuinely fun to use. While each of the new features isn't perfect and has limitations, the utility of things such as wireless printing and locating a lost iPad can't be debated.
iOS 4.2 doesn't give the iPad Flash. It also doesn't give it video chat capabilities. Limitations of the iPad aside, unless you absolutely have to run the iPad jailbroken/unlocked, there's no reason to skip iOS 4.2.1. It takes what was a really good device and makes it truly great.