"What can a child do with an iPad at that age?"
Loads of stuff. Loads and loads of stuff.
There's been a recent pilot scheme based around introducing ipads into schools in the UK. I think generallly for 8-10 year olds. They create "books" on them, make animations, have a ton of educational games (more than edubuntu could offer, I believe) and stuff I don't even know about.
We bought one under the scheme, and in addition to the above the older children use it for their homework, instead of using one of our laptops, and email it in to their teacher.
Watching our smallest children* use it, you really do realise how intuitive they are. My 20 month old can navigate around the OS quite easily, and that's without us teacher her, she's learned from watching us and figuring stuff out herself.
* yes, I have a bunch of children