You might want to look at the Sony T1 as well in Canada. The price just dropped to $139 at the Sony website. It uses collections. The Sony is due for a firmware update soon so fingers crossed it will fix the issues that people have had with their T1's. Sony readers work well with calibre software so you can tag your books into collections there and when you send to your reader, the collections will be set up as well. You can also use Calibre's content server to load books.
My son has the Kobo touch and it works well, but does not support collections at this point so of those two, the Sony is probably the better fit.