I've got a strong password set and iOS 4 will wipe the iPad 2 after 10 bad guesses set with the iPhone Configuration Utility. I know that there was a problem maintaining encryption last time when Apple upgraded iPads from iOS 3 to iOS 4. It was eventually recommended to remove passwords and encryptions before starting the upgrade process. After successfully upgrading, the password/encryption could be reapplied.
Does anyone know if this will be the case this time around going from iOS 4 to iOS 5?