Gridlee + iCade = awesome!
I downloaded it while it was in the app store early last year. With just touch controls it is fine for playing around, but the iCade totally transformed the experience. I took it a step further and picked up a VGA cable for my iPad. Gridlee's 640x480 support works great, and paired with the iCade the experience makes me forget I'm playing MAME on a tablet.
Also added an off switch to the iCade case, and replaced the microswitches for the buttons as they stock ones were pretty stiff.