As someone who collects images, and uses iPhoto for personal photos, I have wanted a way of syncing both my Pictures folder and my iPhoto library. Here's how you can do this.

First, set you iOS device to sync your Pictures folder. Then run the following command in Terminal:

xattr -d com.apple.FinderInfo "~/Pictures/iPhoto Library"

Then re-sync.

This seems to remove an extended attribute that prevents iTunes from syncing the iPhoto Library. Keep in mind that if you have a lot of photos in your library it may take a while to sync them all.

Note: You may have to re-apply the command from time to time, when the attribute is restored by iPhoto.

[kirkmc adds: This works as described. However, this may sync much more than the photos that you see in your iPhoto library. I have a very small iPhoto library, and the number of photos that synced was about 5 times the number in my library. This is because the iPhoto library contains masters, previews and thumbnails. However, that happened the first time I synced my iPad; the second time, the number was much lower. So I'm not sure if this method tells iTunes to find every picture in the iPhoto Library bundle the first time, and subsequent syncs only find the main pictures, and not their variants.]