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I was recently given a free copy of an iPad app called Graphite to try out. It has quite a small selection of drawing tools - basically a pencil and a couple of pastel/charcoal type tools and two sorts of eraser. It's simplicity is its strong point - the tools make pleasing marks and the uncluttered interface means it's fun to use.
I think the full version is £1.99 but there's a free lite version - definitely worth a look.