Hey, Cybermynd, welcome to MobileRead!
Actually, economies of scale are a large part of the deal. Further, it's the displays that make the difference, as the cost of the supporting 'tronix in each case are trivial.
That digital picture doohickey you mention most likely uses a color LCD screen, just like several hundreds, if not thousands of other devices. The planet is lousy (relatively speaking) with foundries cranking such out, and the size differential isn't that big a deal (I believe they make them a set size and then score & break those down to the desired size).
E-Ink displays, however, are really quite new, and (as far as I can tell) there are 2, count 'em two fabs making them in the entire world, solar system, perhaps galaxy for all we know.
That's the gist of it.
