I am presently in the market for an iPad mini to use with SkyDemon and an external GPS. Should I purchase the wifi only model or wifi + cellular model? I've read elsewhere that the wifi only model has a harder time interpreting the incoming data from external GPS devices and is prone to problems vs. the cellular model, is this true?

I'd say that its only a VFR tool so you should still be looking out of the window and using your altimeter so yes it is good enough to enhance your situational awareness.  I've never experienced a GPS drop out.

Hi rg!
Thank you for teaching me VFR rules!
Is your expierence with IPad Mini (my question) or with Samsung Galaxy Tab 10.1 (your signature) ?
Best regards
Claus

Both (well the first ipad mini till I dropped it) but I opted for an android replacement and prefer it in many ways.
A lot of people talking about "aviation grade" gps receivers.  I'm just saying its my view that given what skydeamon is then the quality of your tablets GPS is "good enough".
I'm not sure if this is true however....not tested recently. But I've heard that bluetooth on the tablet uses less power that in GPS so external GPS is preferable.