if u want to be able to watch dvds while driving then go with the n1, the n2 has motion detectors in it and will turn off after u pass 4 mph, not the case with the n1, u can fool the n1, thats the main difference
They both have a separate AV control box separate from the unit. In fact they are both almost identical units (hardware wise), with the exception of a simple software update. The software update will add the monitoring of the speed sensing gyros, which may be a negative effect for some people. Basically, it can sense when you are going over ~5mph and will shut off the full motion video. On the positive side, you now have the ability to view XM traffic on your navi, as well as it adds more roads, and more POI.
So really, it just depends on you.. Do you want the choice to be watching video while your driving? Or do you want pioneer to TELL you you can't?
Btw, you can make your N1 into an N2 with the software update available from pioneer direct, Good Guys, Car Toys, or any other authorized retailer.