I didn't find it distracting until you mentioned it either - now I can't stand the thing
. Actually once you are immersed in a book, you really don't notice anything but what you are reading. Many people pick up a skin or case that can cover up the frame. I've even seen some people take their case apart and paint it!
As for the LCD display, it is far from distracting, and incredibly useful - especially if you have softrooted your Nook. You can quickly navigate exclusively in the LCD display, then select a book and read on the upper display. Pretty tough to do that on any other eReader (not to mention ePub support).