I still don't think we'll see much of a price drop anytime soon, except maybe just for the holidays or something, and I don't believe there'll be an iPad 3 until 2012.
The storage size question really depends on what you'll use it for and how much media you'll want to store on it. A friend of mine doesn't keep any music, photos, or videos on his, and probably uses far less than 16 GB. Me, on the other hand? I can't comfortably fit my music into less than 32 GB, let alone my photos and movies. I using 62 GB of my 64 GB right now. I'm on vacation with only the iPad, and without the extra space, I wouldn't have room for the all the new episodes I wanted to bring for the plane ride.
But yes, the functionality is identical.
As for college, IMO, it's indispensable as a PDF reader, and I plan to use mine to take notes with the note taking apps and a capacitive stylus.