Dru -- I'm sad that you have eliminated the Kindle from your list. I have one and love it very much. I'm planning on acquiring a Sony 505 -- primarily for the experience. I'm sure I will enjoy reading books on it as much as I enjoy reading on my Kindle. The big difference is that I can pick up sample chapters of books that I'm considering buying for the Kindle. I don't believe that the Sony Store offers samples. The Whispernet connection for the Kindle is nice, but not essential.
Part of your planning should consider the book formats and sources. Most current release books are encumbered with DRM (digital rights management) encryption that locks them to a particular device (or devices). Both the Kindle and Sony reader use proprietary DRM formats which means you are locked into one store -- amazon.com for the Kindle and the Sony Store for the PRS 505. (Well, that was true until this week's Sony upgrade that gave it the ability to read some books in ePub format. That may open up more stores to the Sony user.) Other book readers such as the Cybook, on the other hand, use MobiPocket DRM, and there are several on-line store that sell books in this format. (Harlequin Romance even has their own eBook store!)
I have resigned myself that no one makes the perfect device. I just bought what worked for me. And so, I've have the delight of reading on my Kindle since February.
To answer a few of the questions you asked:
* How do the current sizes compare to a mass-market paperback in terms of text display (for 5/6" units)
All three -- Kindle, Sony, and Cybook -- are about the size of a trade paperback, but thinnner.
* Best support from a device-shifting perspective (new unit, newer desktop/laptop for reader, etc. )
For non-DRM content, all three are fine. Software exists to convert from one format to another. I've been told that in the USA it is illegal to circumvent the DRM, so if you get a new device, you'll have to go back to the store where you originally bought the book and register your new device and then download the books again. Your risk here is that the store might not be around at the time you buy your new device or that the store isn't selling those older books in the format your new device uses.
* Are the covers really a good idea, and where do people get them (who has a good selection of cover types)
I use the original cover that came with my Kindle. It works just fine to protect the Kindle while it's in my backpack. Alternate covers abound -- check out various threads in the forum.
* Is there a major difference between 4 and 8 grey scales?
For reading text, no. For illustrations, maybe. It really depends on whether the book creator explicitly created the images in 4-shade or 8-shade formats or let the automated processing handle it.
* Confirmation: you can't get the Kindle version etext without a Kindle PID right? even if reader can read Mobi-format
You cannot buy books from Amazon.com in Kindle format unless you have a Kindle registered with them. Amazon.com does not sell regular MobiPocket format eBooks -- with or without DRM. Some sites that sell MobiPocket books will accept the PID from the Kindle -- others don't.
* Largest selection outside of amazon for genre fiction and technical publications (where to BUY)
See the MobileRead Wiki
for information on book stores.