It's an interesting use of the Smart Cover, but can it be a serious competitor to other flash card replacement apps since there's no easy way to report success or failure by lifting/replacing the cover?
Also, is right/wrong reporting really that important? I don't have a way to do it with paper flashcards...
One might not be able to keep score easily with paper flashcards, but that doesn't mean it's not useful. I'm not that familiar with handheld flash card app space, but I could see an app providing score tracking and more frequent interweaving of previously missed answers, and an overview of immediate feedback can be helpful.
Statistics are pretty much the only advantage I can see for using an iPad here instead of physical notecards, unless you have so many notecards that it would be a pain to carry them around which seems like a very obscure use case to me.
2. If you aren't using spaced repetition statistics with your flash cards... you're doing it wrong.
Most people separate paper flashcards into two piles as they go, one for those they got right and one for those they got wrong.