Is the cellular version worth it over Wi-Fi only?

If you use it on trains, in cars or outdoors without a hotspot, yes. The 5G radio keeps it online anywhere. If it mostly stays home, the Wi-Fi model does the same job.

How does it compare with the larger iPad Air?

The Air has a bigger screen and supports a keyboard case, which suits desk work. The mini is far lighter and easier to hold one-handed, so it wins for reading and travel.

Can it replace a phone?

No. It has cellular data but no phone calls over a carrier number in the usual sense, and it is too big for a pocket. It works as a companion device for messaging and browsing.

Does it work with the Apple Pencil?

Yes, it supports the current Apple Pencil for drawing and notes. Check which Pencil generation your model takes before buying, since the mini line has changed compatibility.

How much storage do I need?

128GB covers books, notes, streaming and a few games. If you download large games or store video offline, consider a higher capacity.

Is the screen good for reading outdoors?

The OLED display is bright and sharp, and the light weight helps for long sessions. Glare can still be an issue in direct sun, as with any glossy tablet.