I have had the misfortune of dropping my ipad2 off a desk. Its not pretty.
Different Apple stores react differently. The one I when to allowed me to 'repair it', wink wink. I traded in my broken one for a new one at half price. I've met other people that were not as lucky.
The best protection that I have heard is the 'otterbox' which runs about $100.
Another excellent protection device is called iBallz
http://iballz.info/I just saw a demonstration of it at a convention. Its a quarter of the price of otterbox. And at the demonstration the guy tossed his ipad2 12 feet with no ill effects. Fantastic!
