Dexteria - Fine Motor Skill Development
Although I haven't used this app myself, watch the Demo and I am sure you will fall in love with it like I did. This is on the top of my wish list. It doesn't have the glitz and glamour of some other letter tracing apps, BUT it documents the student's success. Let's hear it for easy data collection. Amazing!
Also, love the rest of information offered on this educational website - Apps for Children with Special Needs.
I am wondering if anyone has a preference about stylus' available for the iPad, as I feel that is a more functional way for student's to learn letter formation.