There's actually a tutorial for it here which someone from the cocos2d forum found:
Cocos2D: Using HD images for iPad in a Universal App Michael's Blog Site
Note, though, that it will leave a bit of a border around the sides. If you don't want a border you might have to rewrite all your positions from scratch since the iPad has a different aspect ratio from the iPhone..
Yes, the sprites should be double the size.
Edit: Err, actually it won't necessarily have a border. That is only if you are using retina display graphics where the background would be 960x640. If you don't want a border, you should make your background 1024x768.