After getting the 1.9.6 release, I decided to keep my Kobo Touch. I haven't been able to find a case or sleeve that I like. I was tempted to buy one of the sleeves from indigo/chapters but many reviewed it as being too tight or causing stains on the Kobo.
After much searching, I've decided to buy a hand made sleeve from etsy.com. There are some cute designs. I've leaning towards the seller "bertie's closet" here:
Haven't decided yet which design I'm going with but will give an update once I receive it.