The NEVER purchase extended warranties because they're ALL a ripoff view (which I used to espouse myself BTW) is really just the opposite extreme of always buying them. Better to consider cost/benefit on a case-by-case basis, do some research and ask around (as the original poster is doing).
Before purchasing my 505, I searched and found warranty/support feedback on several sites (I remember Amazon being a good one). There were numerous posts from people distraught over a broken e-ink display that Sony absolutely refused to fix without charging almost as much as the cost of a new reader (as someone else noted here). This is in contrast with feedback from those who did purchase the extended warranty and promptly received a fixed or new reader from Sony without any questions. That included cases of accidental damage. But don't take my word for it. Best to do your own research.
It's not just Sony. Unfortunately, the e-ink displays on most current ebook readers are fragile. Your reader will probably be fine if you're careful and protect the display with an adequate cover or shell when not in use. But one incident like dropping or accidentally leaning on it or something hard falling on it and you could be facing a new purchase.
In this case, I recommend getting the Sony extended warranty. It's not very expensive and, as others have said, the peace of mind is worth it--even if I never use it.
Enjoy your new ebook reader!
