An upgraded processor and graphics processing unit are almost a given. Those items alone aren't very exciting as they wouldn't substantially differentiate the iPad 2 from the original iPad. We humans like visual cues and packaging changes or much nicer displays are more likely to catch the eye than under the hood upgrades to parts of a product that aren't currently viewed as lacking. Tech savvy people may get excited about such things, but that only goes so far.
Having said that, Apple is in a place right now where they almost can't do any wrong. A less than obviously spectacular upgrade to the iPad wouldn't hurt sales in the short to mid term (think about the iPhone 4 grip of death debacle) but this early in the iPad's history it would risk starting Apple down the path of mediocrity and that would be potentially problematic given the importance that is being placed on the mobile computing space.
It's not outside the realm of possibility that Apple is in to some extent responsible for the rumors and counter rumors. They do love their secrecy and it has to be increasingly difficult to keep things under cover as they continue to gain market share on almost every front. Literally thousands of people are involved in bringing something like the iPad 2 to market. One way for Apple to gain some control is to become involved in the process. There have been claims to this effect before from informed sources.
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