I have to agree with RSaunders, I think his point that you guys may be missing the author's point (although he misses several points himself).
A book reader has, at best, a very limited appeal. Books themselves, in fact (and sadly), have a fairly limited appeal. In 2003, the Jenkins Group did a study and found that 70 percent of U.S. adults have not been in a bookstore in the last five years.
So at best you're talking about 30% of the population as a possible target. And I think he's dead on about Sony's lack of focus on expanding the reader market. Without search capabilities, they've lost the technical & professional reader market as well as the student market (just think of the potential for a searchable e-ink device for students). The portion of the technofile market that jumps all over every other device that comes out that would be interested in a dedicated reading device is not likely to jump on this even if it does play music- they are no more likely to be hardcore readers than any other segment of the market. And I don't think it is possible to stuff enough diamonds on a cover to make Paris Hilton carry one around.
As the author says, the reader is transient technology- a promise of a very nice future, but it is expensive for a one trick pony. I'm sure that in the future we will see e-ink devices that make the 500 and 505 look like a pocket calculator from the 60s next to an iPhone. And these devices will find an audience. In the meantime, a market of 10,000 devices sold shows that this device hasn't really found a mass market.
The only reason Sony is supporting the market is probably the fact that their eBook store is bringing them money. And (IMHO) the reason that this is happening is because publishers like the idea of non-broken DRM. Sooner or later, that is likely to go away- hopefully enough momentum will exist to carry Sony through this to market maturity.
Now, as to the points the guy missed.
1) e-ink screens are at this point, not much use in a multi-function device. And they are critical to a dedicated reading device.
2) single function devices do have their place. The iPod started as a single use device, as (to a lesser extent) did the Palm OS. Both of them started with the critical problem and moved where the market pushed them. We can hope for the same from Sony.
3) There is a market for the Sony reader, even if it is a small one. It is people who read and travel. Sony has targeted this market in advertising. And I don't think many sad executives are likely to buy it to impress.
4) There is actually a reasonable amount of content for the reader. And as much as I would like the device to support HTML, the fact that the average non-technical purchaser will never be able to put anything on the device but Sony Connect content is to Sony's advantage, and until they have a significant competitor in the market offering that, they will not support it.
And with that, I think I have rambled on quite enough.