"I'm thinking of purchasing a a second e-reader (I have a PRS-650) and I saw a Kindle 3 for the first time the other day. I thought it was very handsome. So I'm thinking of purchasing a Kindle, but I have some questions / remaining doubts. I would appreciate your comments."
I own both a K3 and a jetBook, roughly comparable to your anticipated setup.
"1. Is it easy to look up words in the dictionary?"
Reasonably. The D-pad isn't as quick as a touchscreen. The jetBook has more dictionary options, like multiple languages, but I don't see much difference.
"2. Is it awkward to store a lot of books on the Kindle? I currently have about 300 documents on my reader."
No. You should have no real problem at that level. I much prefer the jetBook's folder system to the K3's collections, but mileage varies so. I would suggest you think carefully about how you want to organize 300 books, but I presume you've already done that on the 650.
"3. I understand I have to register the Kindle in order to be able to organize books into collections. Does this mean that I cannot organize free / self-produced / non-Amazon-purchased content into collections?"
No, the collections work for anything.
"4. Do the letters rub off the keys on the black kindle?"
I haven't had any problems.
"5. Has the crash problem been fixed? Does the browser make it crash?"
I've never had a problem.
With respect to case and covers. I use a cheap ($8-10) generic cover when the K3 is in my briefcase, etc. When reading, The K3 is fine naked.
The light weight makes it easy to single-hand. And no, I don't have giant hands. If you need more light to read, turn on a lamp. "Don't read in the dark; you'll ruin your eyes!"--Mother
My one piece of substantive advice is to think carefully about whether you need the 3G phone connection. I have it, but seldom use it. In hindsight, I lean towards saving the $50. In truth, I don't use the WiFi that often. I usually connect by cable unless I'm downloading an Amazon purchase.