Looks like all your questions have been answered but I'll just go on and add my $0.02 anyway.
As for privacy and de-DRMed books, I have plenty of DRM-free books on my Kindle (all legally acquired) that are not available without DRM. I have never had a problem. That's not to say I never would, of course, but I think this is a can of worms Amazon would be quite reticent to open. Look at the kerfuffle over them removing the Orwell? If they started meddling in people's personal files, there would be hell to pay. Besides, if we take the music industry as an example, since they've been at this longer, the copyright holders so far have been most interested in people who are uploading files. It's not worth it to come after an individual with one or two of their books when they might have a hard time proving it was a pirate copy.
As for fragility, it has a glass substrate. People have dropped them and had them be fine. They have also dropped them and had them break. I recommend a fairly stiff cover and a decent amount of caution. I've had mine over two years and it's fine. I don't carry it with me every day, just when I know I'll likely have some free time to read. It fits in my handbag but I tend to buy larger handbags. I can carry my wallet, mobile, glasses case, sunglasses, umpteen lipsticks, a bajillion tiny scraps of paper that seem to be breeding with each other and my Kindle in a medium-sized hobo bag with no trouble.
I never use my Kindle to play MP3s but that's because I don't tend to listen to music when I'm reading. I find it distracting. Plus, I'd have to pick the soundtrack to go with the book's mood otherwise it would detract from the story for me. So I'd have to read the book to make the soundtrack to read the book. You see where this is going. Anyway, the only warning I would give about it with the K2 is that you have a little under 2GB. That's thousands of books but it will fill up fast with songs.
I have to pick one favorite thing? I can't, but I can give you a short list. I'll stick to things that many readers don't have. Search, dictionary look up and annotation were three big reasons I bought the Kindle over its competitors at the time. Still, most devices do not let you do these simple things. Another big differentiator for me is the book sampling. Some other stores do this but the combination of samples and whispernet is a great service. Not only is it amazingly convenient, it keeps me from wasting money. I don't buy books without reading the samples first unless I'm out of the country (since I have the old Kindle without International wireless). This means I have a pretty darned good idea that I'm going to like the book. Back in my pbook days, I probably ended up not reading a good 20% of the books I bought. I'd read a page or two in the store. It would seem interesting and I'd buy it. Then I'd end up not liking it or sometimes never even starting it. I was trying to buy enough books to last me between trips. Sometimes my fancy for the book would pass and I'd never pick it up. That doesn't happen to me with the Kindle. I don't have to plan ahead to buy books. If I finish the sample and I'm nowhere near my computer, I can still buy the book and keep reading. When my husband was commuting by train, this was a huge deal for him.
I hope this helps. Good luck with your decision. I love my Kindle but there are plenty of other great devices out there.