The best way to make your book suitable for the iPad and other digital reading devices is to use ePub format. This is a very easy format to create and it allows your text and images to reflow and resize to fit the screen of the device. This makes the readers experience positive and allows the device to sort out the format.
The issue a lot of people have when trying to convert a picture book to ePub format is that the illustrations and text must work together in a certain way. When designing your ePub layout think about the end user reading it on the device. You don't want your text to be on a separate page to the illustration because then they will be on the screen at different times. This will break the readers understanding and following of the story. You might need to re design your layout to suit the format. This shouldn’t be a problem as most illustrations can be cropped of resized. You can always add a strip down the book with the words on it. See below example
A great tool I found for creating ePub files is http://code.google.com/p/sigil/
It is free and easy to use, there is an instructional manual that should answer all you questions.
For more information about ePub format see my post What is EPUB format?