I created a couple of custom lined paper files as I write smallish - I find the Iliad really good as a general notetaking device - I also use it for semi-formal reporting - where I have a document with printed questions and a space to scribble the answer in - again the Iliad is great for this type of thing.
I draw a lot of diagrams in my work - I find the Iliad a little too inaccurate for this when I want to display a lot of detail.
The ability to take notes is a bonus for the device - but I wouldn't buy it just for this feature (how much for a notepad?!) - I already have a Pegasus Mobile Notetaker which is better for detailed drawings and very long notes, also easier to stow away. The Pegasus allows you to annotate on screen documents ... it would be good if the iLiad could be used as a tablet when connected to a PC like this, sadly as of yet it can't :-(
Good luck with your decision ...