Brett, many thanks for taking the time and trouble to demo this for us. There is definitely room in the market for an intermediate device between fiddly small browsers on smartphones and 1kg netbook laptops. There are some 'MID' mobile internet devices, with around 5" screens and slideout keyboards, but battery life tends to be low, and they are still fairly heavy. That's why I think an E-ink screen you can plug into a smartpone would be a winner.
In the meantime, I'll probably go for a nokia n810 web tablet, which also has builtin gps and wifi and FM radio. The 4.1" 800*480 screen isn't quite as big as the kindle's, but the unit only weighs 7oz, and you get to watch movies as well as read text. As ever, charging batteries is an issue.
The cheap'n'light solution to a basic e-book reader is to buy an old palm III or a handspring visor off ebay which uses AAA batteries. Using the free and very good palm ebook reader software, you can access a lot of literature for free through project gutenburg. The 160×160 screen ain't in the kindle class though.