The K3 has buttons on both sides for moving forward or backward in a book, so it is quite easy to use.
The arrangement of "collections" is possible and you will find several posts here that discuss different options that folks have devised to get what they want.
I do have the lighted cover and love it. It does add weight to the K3, but also protects it and does not seem to significantly draw down the battery. I tried a variety of lights on my K1 and never found one that was as pleasing as the lighted cover, mostly because of glare. Plus, no more searching for new batteries.
Storage is not an issue for me as I keep my library in Calibre and only but a hundred or so ebooks on my K3 at the same time.
If you use Calibre and have the new plugins, coverting epub to mobi takes seconds. I tend to do it in batches after I have added a few new epubs.
I have an iTouch and have used it for reading ebooks. Yes, I miss the touch screen and considered the iPad. The price and weight quickly nixed that idea. Reading on my K3 is fabulous. Connecting to the web required patience after being used to an iTouch.