I've been pleased with the Noterize app using a stylus but I don't use it in a classroom situation (and I don't think you can paste pictures into it).
One cool feature it has though is the ability to record the audio in the room and break it into separate files as you create new note pages. Again its years since I've been in a classroom but I find it useful for editing my writing.
I did a mini review of it
http://blog.brentknowles.com/2011/02...-app-noterize/
Link to store
http://itunes.apple.com/ca/app/noter...364906681?mt=8