Is there an iPad app like Snagit for marking up screenshots or pictures with arrows, callouts, dropshadows, torn edges, etc.?
I you are looking mainly for annotation then Skitch could be worth a look.
It lacks the more fancy features you asked for (torn edges, blur, etc.) but for basic annotation (arrows, text, freehand) it is quite good.
Although it was acquired by Evernote it is possible to save the annotated image back to the camera roll.