Some of the improvements you will obviously notice right off the bat are:
1. The larger screen (Its really beautiful)
2. Better battery life (Touch Pro1 = 8-10hrs, Touch Pro2 = 12-14hrs or there abouts) Just to give you an idea
3. Better build quality, doesnt jiggle when slid open, its solid and feels like it clicks into place when slid out, unlike touch pro1
4. Tilt feature, comes in handy
Some things you might not notice:
1. Keyboard is space out so nicely, its the best keybord on any smartphone I have ever tried. It really is the best out on the market right now.
2. Prox Sensor
3. zoom bar (LOVE IT, use it all the time)
4. The speakerphone is the BEST EVER (Loud and clear all the time, truly a confrence phone)
Those are just a few things that set it appart from the touch pro1. I have to say, things like the flash you wont miss. In fact the only thing I remember using it for was a flashlight, it sucked as a flash for the camera. The biggest deal is the screen and the battery life, with more working space its a dream to browse the web on this thing and the battery life is 2X better than the Pro1.
For me its an obvious choice and recommend.
The only thing I really have to complain about with it is sometimes the sluggish 528Mhz processor rears its ugly head and can lag just like the touch pro1 did but its not as bad. Wish it had a snapdragon and captive screen for pinching n' stuff but overall I like it.
If you can get the phone for cheaper than 349 I say do it but I would have a hard time letting go that much after a mail in rebate for watcha get when phones like the HD2 and Nexus One are right around the corner ( I got my touch pro 2 for free
)
Hope this helps!