The Kindle Fire may be shaping up to be the first real device to challenge the iPad’s share of the tablet market but it’s not going to go unchallenged: book retailing giant Barnes & Noble have just announced the next generation of their own Android-based reading tablet, and unlike the Kindle Fire, its specs match and even exceed the iPad 2’s for half the price.

The new Nook Tablet is the successor to Barnes & Noble’s popular Nook Color, and like the Nook Color, it’s a light 7-inch tablet running a custom UI on top of Android Gingerbread 2.3. The specs, however, have been radically ramped up: inside the Nook Tablet you’ll find a TI OMAP 4 processor running a 1.2GHz dual-core CPU (!), 1 gigabyte of RAM, 16GB of internal memory and 11.5 hours of battery life… way better than the Kindle Fire.

Feature-wise, the Nook Tablet also has some advantages over the Kindle Fire. Unlike Amazon’s tablet, which is merely a hardware portal to Amazon’s own services, the Nook Tablet will run apps for subscription services like Netflix, Hulu and Pandora.

Unfortunately, despite the seemingly great specs and more flexible feature set, the Nook Tablet doesn’t seem to have matched the Kindle Fire’s incredible performance. Gizmodo, in particular, was not impressed by their hands-on demo:

Briefly seeing the Nook Tablet in action, it’s hard to image what the dual-core CPU and gig of RAM are being used on. I wasn’t expecting mind-blowing performance, but I’ve seen lesser spec’d devices with more polish.. Barnes and Noble handlers didn’t allow me to play around with the device on my own, but watching it in action, the sluggishness of the UI and browsing was noticeable. Menu and app transitions, along with page turns and scrolling looked choppy and somewhat unresponsive. The homescreen UI wasn’t as affected as, say, the web browser, but I was hardly wowed by what I saw. Pages seemed to render quick enough, but that could have been a cached page. Web pages, especially, panned and zoomed with the fluidity of a first generation Android device.

Media and gaming apps, seemed to fare better. Netflix videos, streamig in HD, looked fluid, with only a hiccup or two over the course of a minute-long clip. Bejeweled, admittedly not a game that would tax the Nook Tablet hardware, looked as smooth as it would on other devices.

Will the Nook Tablet be able to take on the Kindle Fire? It’s hard to say, but $50 is a wide enough price gap in the low-end of the market for me to think it’s likely that the Nook will remain an also-ran. Either way, the iPad 2 seems safe.