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About the price, it's probably the same strategy as in videogames.
Most videogame consoles (the most notable exception is the Wii) are sold for a price lower than the costs. Why? Because companies don't want to sell consoles, they want to sell games. So they partially subsidize the console prices so that more people buy them and they sell more games.
That's very important because games have almost no variable costs (cost per unit) but have a very high fixed cost (overall cost no matter how many units sold). That's because game development is very expensive (we are talking 7 figures here) but the actual games are basically a plastic disc inside a paper box.
So, back to the Kindle, Amazon doesn't want to sell e-readers, they want to sell e-books. So they can sell Kindles for a price lower than the costs and still make a profit by selling books. And I imagine e-books are pretty profitable.
That's why the Kindle and the Nook can afford having very low prices, which on the other hand makes life very hard for independent hardware makers, with no book stores.
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