I actually think they are putting this up head to head by making people ask the question about whether they should bother spending the extra £200 on an iPad.

Tablets are very much a luxury item, no one really needs two of them.

Essentially they're after people who are on the fence by making it too attractive price-wise to pass up on.

I think you're right that tablets are a luxury item but that might also be part of the iPad's success too. People aren't really looking for the cheapest option it seems. I remember reading somewhere that the average iPad sale price ends up being above $650 since a good number of people opt for the larger capacity or cellular models.