I was successful in getting iPad out of 'store demo mode'. I bought the iPad 1 from Wal-Mart. The unit was a 'store demo' that was replaced with an iPad 2. I was just walking thru electronics when they set it out on their clearence table. Must have done something right that day! The unit came with iOS 3.2.2.
Connect iPad to iTunes using USB cable.
Update the iOS to 5.0
After update is successfull, the unit was still in demo mode.
Disconnect USB cable... wait couple minutes... reconnect USB cable.
Now the important step, Click Restore.
Choose 'New' when prompted (I don't remember exact text displayed)
After restore is successful, the unit will no longer be in 'demo' mode.
More, there is no Restore selection on the Settings>General screen when unit is a demo unit.
After Restored, the Restore selection shows up.
I hope you find this info helpful.