Sony Cover + Timbuk2 Case
I took these pictures months ago but forgot to post them. This is my PRS-T1 with the standard Sony cover and the Timbuk2 padded sleeve. I believe the sleeve is the one made for the Kindle Fire. I love this combination.
The Sony cover folds back effortlessly when I'm reading, and there's almost no material around the edges of the reader - it's a very clean look. The Timbuk2 case is very well padded (feels like some sort of dense memory foam) and I feel completely confident about tossing it in my purse or laptop bag. The stylus slides into the case and clips onto the edge of the sleeve, and is quite secure; I've never had it come off accidentally (or intentionally - I never use it at all). After six months of use, the reader, cover and sleeve still look brand new.
This is a pretty expensive combo relative to the price of the reader (but perhaps not, relative to the amount of time I've spent setting it up). However, the Sony case was a gift with the reader and I had an Amazon gift cert, so it was a guilt-free solution. ; )