Update 08 April 2017: Elon Musk tweeted an indication that they're revisiting the possibility of second stage recovery, so this question is again relevant, and the details of the new solution may be different from the old.
Fairing is ~$5M, but that should be reusable this year. Am fairly confident we can reuse upper stage too by late next year to get to 100%.
SpaceX wants to make the Falcon 9 completely reusable. They're making definite, if slow, progress toward recovery of the first stage via powered landing, which requires several features:
- Cold gas thrusters to turn the stage tail-first after second stage separation
- Aerodynamic control surfaces at the top of the stage for trajectory control during the landing approach
- Deep throttling a single main engine to get a low enough TWR for a controlled landing
- Landing legs
The upper stage will be coming in a much faster trajectory, so they have to add a full heat shield at the front of the stage.
At first glance, the much shorter second stage would seem to need shorter legs because its center of gravity would be lower, but the upper stage version of the Merlin engine has a very long nozzle, which is radiatively cooled -- which means exposed, not shrouded, so the legs will have to mount quite high, and be fairly long (and thus heavy).
The biggest problem, however, would seem to be the engine throttling. The empty upper stage weighs something like a quarter of what the first stage does, but will be firing almost the same thrust level.
Are they going to try to throttle deeper?
Are they going to do the same hover-slam trick as the first stage, only on a much shorter timeframe?
Are they going to add 2 or 3 Kestrels alongside the Merlin on the second stage and land gently on those?
Parachutes? Airbags? Really big pogo sticks?