I did try killing background apps, and turning down quality settings in Avadon, with no change in the problem. It is worth noting that between pauses, there is no slowness of animations and such, it appears to run perfectly except between combat turns.
It is interesting that you say it worked fine in Ipad 1... this makes me think it must not be inherently a problem in the game.
Perhaps there is some wasteful process in the background, which is not represented by an app and so not shown when one double-taps home? Mail checking, or wifi syncing, or who knows what... It is too bad iOS doesn't include some kind of resource manager.