Thanks for your help guys. I had already tried the transfer of new apps so I tried deleting the backup from iTunes (I had deleted the backup before but stupidly did it by deleting the file manually...not through iTunes.). Then I did a backup and it worked! The only thing is that the synch that followed put back a lot of apps onto the iPad that I had deleted from the iPad and also removed some newly added apps. Once I reinstalled and deleted those I tried another backup and it stalled again.
So...I deleted the backup again and went for installing the new ios. During the ios install it did a backup that at least went to completion. Guess I don't know if I can count on it working or not.
Do you know if when a new minor ios is installed if the whole ios is reinstalled or just the changed components? Am thinking that if there was something wrong with my os that maybe a full install might maybe have fixed things up?
I'm not sure about the OS question but based on the size of the update files I'd say the existing OS is completely removed and replaced with the update, but I could be wrong.
If you deleted the original backup via iTunes and the new update completed normally, but then problems arose when you added and deleted apps, it sounds like you may have a problematic app corrupting things.
Here's what I would do...I would use iTunes to delete your backup. Then I would connect your iPad. When it begins to backup/sync stop it by swiping the slide lock on the iPad screen. Then, while the iPad is still connected, go to the apps tab and uncheck any apps that you've added recently. Then disconnect and reconnect your iPad. See if it will backup normally. If so I would start adding apps one-by-one and go through the same backup process. Depending on how many apps you have to deal with it could be time consuming, but it's possible you'll be able to narrow it down to an app that's not behaving itself.
If/when you find the problematic app you can delete it (touch and hold the icon on the iPad screen until they all start giggling and touch the circled "X" in the upper LH corner). Re-sync your iPad and then try downloading the app again. If there are still problems I'd report it to the app developer.
No guarantees that will solve the problem, but that's the first thing that comes to mind based on your experience.