The Sony isn't an option for me... I'm sure it's a fine device but the case alone would drive me nuts. EDIT: Also regarding buggy software, there's a thread over in the Sony forum about freezing T1's, so ...
As for buggy software on the Story HD, I've had worse - my old PB360 used to crash every so often and you had to open it up and press a hidden reset button to get it going again. The Story HD on the other hand, rock stable. In fact so far I haven't seen a single bug in the software.
Even so, I was curious. I took the largest SD card I have (only 4GB unfortunately), filled it up to the brim with ebooks (actually I just took my own collection and made several copies of it until the card was full), and put it in the device just to see what would happen...
4GB SD card, 6450 epub files on it in total. Cold start and DB update took 2 minutes 39 seconds. Reader was usable, I browsed a book list of 625 pages, selected one, book loaded fine and was readable like normal. Pressing the back button and getting back into the 625 page book list however took several seconds. Switching operating mode from DB to Folder List (folder list being what I use normally anyway) resolved that issue as I have only a limited number of books per folder. I didn't test putting thousands of books into a single folder.
I don't have a 16GB card to test with and I won't buy one just for this purpose, but at least with a full 4GB set of epub books, I do not experience the hanging / reset issue.
The Story HD works fine for me and I'm very happy to have it.