I too am bummed out about this and this is the single biggest reason I am considering going with another reader. I cannot under any circumstances read with one hand and feel like I might not drop the device. There is so little space around the screen to place your hands anyway and then having to slide my thumb over to push that button leaves the unit just balancing in the hand instead of actually being gripped by it. Forget laying on my back and holding it above my chest and trying to page turn. Drop it every time.
I think the buttons, or secondary ones, should have been put beneath the screen. But whatever. That is what choice and variety are about.
The K3 is nice, but the button placement sucks for me personally. I am sure in a case I would have something to hold onto, but the device needs to be comfortable on its own first and foremost and the case merely a way of protecting it-for me anyways.
But I agree with the OP and wonder, did you return it yet? If so, what reader are you considering now?