This blog post could be of interest to some as it describes the various apps recommended for this.
How to use iPad as a document camera in class
So far, I've only played with one of the apps they recommend (IPEVO Whiteboard) but it looks promising.
My next step is to find an affordable way to hold the iPad in the air. I have come across this product but haven't purchased anything yet. If you have another suggestion, please let me know.
Let me know if you'd like to experiment with me. I always enjoy trying something new with others.