Hey there. I thought I may chime in.
I'm 14 and computers have been a part of my life since I was about three. I learned some Spanish and this education was continued into school. I am now in the 9th grade and have been taking Spanish for 9 years. I have always used the computer to play games, learn, and type papers, and followed my parents instructions while browsing the web. They set some limits for me and they gradually changed them as I grew.
You should put some tight restrictions when they start using it. For example, I was only allowed to play pre-loaded games, and when browsing the web I was limited to about 7 pre-approved websites (including some kid-friendly game sites). As I grew, I was allowed to browse other websites sans forums, then finally I was allowed my own email and allowed to chat on forums.
The computer is a really valuable tool that should be taken advantage of. Kids are using computers younger and younger every year, and basic word processing skills and basic computer understanding is a real advantage.
You should give your kid your iPad. Set them with restrictions. If they follow them, promise them they can play with it some more tomorrow/next week. If they break them, tell them they will not be able to play with it for a few weeks.
As per buying them an iPad... That really does depend! First make sure you have the budget to pay them an allowance if you go that route, and make sure it is always consistent and always there. Do not tie allowance to chores. They do chores as a family member. If they do not do their chores, impose another punishment that does not involve taking away their allowance (no iPad, perhaps?). The idea of an allowance is to show them good financial management skills.
You may also wait until you replace the iPad and give them your old one as a hand-me-down.
I have been saving my money for "big-ticket" items (like a video games when I was 5 or 6) for a while. Now that I'm 14 those big ticket items get more expensive as my tastes move up. I recently saved up for about two years, every penny, and bought a MacBook Pro. Two years before that, I bought an iMac. I have not regretted my purchases.
I value everything I have and am now saving for an iPad. I am glad it is not as expensive as a computer because I do get very anxious waiting, and it worsens the closer I get to that "magic number."
I cannot afford the monthly 3G payments, so I will be buying a WiFi iPad. I still have a ways to go (about $300) but I am getting there! I have a cellular data plan, so I may just use a WiFi tether.