Wim,
You've hit the nail on the head. I did need to reboot after the installation, but here are the steps I followed:
1. Download and install iPad software v5.6 from here:
http://www.displaylink.com/support/downloads_ipad.php
2. Download and install DisplayLink v6.1 from here:
http://www.displaylink.com/support/downloads.php
3. Reboot
4. Connect via iPad app to laptop
*Note: I had tested without the reboot, but received the same message as noted in the OP. After the reboot, nothing but success
Thanks for the response. This would make a good sticky or tech note if you guys have those.