16G iPad 3 or 32G iPad 2?

I am getting ready to buy an iPad (my first one ever), and I am debating between the 16G iPad 3 and the 32G iPad 2. I don't want to spend more than $500 for this device because I am also going to buy the Apple Care warranty.  I have a 32G iPhone 4 which holds almost all of my music. I don't have many video's now because my phone is full but I would like to have some. I also have not made use of the cloud so I am not sure that would resolve my storage concerns.
Are the new upgrades worth sacrificing storage space?

What are all the differences between the iPad 3rd Gen and the iPad 2? Is the iPad 2 worth the cost savings?
http://everymac.com/systems/apple/ipad/ipad-faq/differences-between-ipad-3rd-gen -2012-ipad-2-2011.html
What are all the differences between the iPad 3rd Gen models? Which should I buy?
http://everymac.com/systems/apple/ipad/ipad-faq/differences-between-ipad-3rd-gen -early-2012-models.html
Should I Buy a New iPad? Or an iPad 2?
http://www.maclife.com/article/blogs/should_i_buy_new_ipad_or_ipad_2
Check Apple's refurb iPad 2. May be less than new iPad 2. Refurbs have a 1 year warranty.
 Cheers, Tom

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