As a long time PRS 500 owner, I also finally made the trip to the Sony Style store to compare the 700 and the 505.
The contrast is better on the 505, but the 700 is very comparable to the 500. I think this is a good trade-off for the benefits of the touch screen.
For me, the killer on the 700 is the side lights. The gap necessary between the screen and the e-ink surface made it feel like trying to read a book through a window. It was much too distracting for me.
I really like the new features of the 700, but if I had to choose today, I would get the 505.