I just got a Sony Reader and I'm crazy about it but I still read at night in bed (wife = lights out) on my Palm T|X. Reading with a backlight doesn't bother me at all, especially with the adjustable colors on most Palm reader apps. At $300 sticker, the T|X is expensive but I'm sure you can find used Palms for less. Just stick with Alexander's advice and get 320x320 (or 320x480, just avoid 160x160) resolution.
My experience with Lithium Ion batteries hasn't been great and I think every Palm with a 320x320 screen has a Lithium Ion battery. The battery life rolls off substantially after a year or two. So a used Palm you may not get much battery life, maybe an hour or two. If you can find one of the older Palms they allow you to turn the backlight off in strong light, which saves a lot of battery.