PhatWare have updated their iPad app for notes, PhatPad. It still sucks that their website relies on Flash but the app is good.
Not only does PhatPad have extremely fluid sketch tools and audio recording, but the handwritting to text facility is great. I really like the ability to hand write and convert a selection to text. It can be very distracting to have handwritting converted on the fly. Sometimes I just want to make a quick note and not worry about getting the text conversion on the spot.
PhatPad has been on my homescreen ever since my real world note-taking experiment. Unfortunately there's still only one audio note per page.
By way of MacMegasite