Penultimate app is a great replacement. When a friend of mine told me the Noterize app is even better I didn't hesitate spending the three bucks to check it out. What I'm finding though is that I really need both apps.
Noterize is great at a lot of things. You can write on a document (better with a stylus than your fingertip), highlight portions of it and even drop in the digital equivalent of a PostIt note. The killer feature for me though is the audio recording capability Noterize supports. If you're in a classroom, business meeting or any other place you'd like to record the audio, just click the microphone icon and relax. I've been wondering when the iPad will offer Livescribe Smartpen functionality and Noterize is about as close as it gets (so far). The key Livescribe feature that has yet to be replicated is OCR, or the ability to convert your written words to machine-readable ones.
Noterize is also able to import PDFs and PowerPoint slides. I love this because it lets me mark up documents and send them to others for review. I put Noterize to the test right away by reviewing and annotating a 40-page research report I received at work. It was a great experience as I was able to put all my notes right in the PDF and then email it to a colleague. The process was a bit quirky and Noterize isn't totally bug-free. It looks like it's possible to press "send" when emailing a doc before the doc is actually loaded and ready. I've run into this problem a couple of times now and it's pretty frustrating; just be sure an image of the document is displayed in the email message body before you try to send it. (Note to Noterize: Hey guys, how about simply graying out the "send" button till the doc is loaded?!)
The other beef I have with Noterize is that it doesn't feel as responsive with a stylus as Penultimate does. Maybe it's all in my head but I find it easier to take handwritten notes with a stylus in Penultimate than in Noterize. And don't believe what either of these apps tell you about "Palm Protect", or the ability to prevent your palm from making stray marks on the document, as Noterize refers to it. They're both far from perfect here and I often find myself erasing unintended palm marks.
For the time being, Noterize will be my document mark-up tool of choice but Penultimate remains my notebook replacement.
P.S. -- I'm still puzzled why Livescribe continues sitting on the sidelines. Someone will eventually add OCR functionality to one of these apps and Livescribe will watch tablets eat their core business. Just because they ignore the business opportunity doesn't mean everyone else will!