We just released Skylight for iPad which sort of does what you need. You can delete text from the actual document and then place a text box over the location.
It does a lot of annotations, and saves the, quickly and correctly. The only problem with the app is that it only supports iTunes for getting PDF's onto the device. We will be adding more connections soon.

Originally Posted by irwaffles

I use iAnnotate, and I can't vouch for whether or not it can handle 500 page pdf files, but I can say that it does everything else you want just fine.

I'm a biochemistry major and I use it to take notes during all my science lectures and it works wonders.

We tested Skylight using a 850 page document, which it handled perfectly.