HERO2 is the latest and greatest upgraded version with sharper lens and some more features, better low light filming and easier to use menu system.
There are some good side by side videos on YouTube showing performance differences.
The HERO2 is also compatible with the latest features of the WiFi backpack, like video streaming.
The HERO2 is more expensive.
http://gopro.com/hd-hero-cameras/
http://gopro.com/hd-hero2-cameras/
Once you've picked the model, choose the kit you want - Outdoor, Surf, Motorsport etc. This describes the mounts that the camera comes with.
The HERO2 Outdoor comes with sticky mounts, helmet mount and vented strap mount, so is the best option for riding and skiing.
Also have a look at the chesty mount and a ride hero mount to stick on a pole for some cool pole cam angles. Quality is great but the key is mixing up the angles and get creative on the editing to make something watchable (unless you are a Pro athlete where straight off the cam footage looks awesome!).