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I actually bought a Kobo just a couple of days before the Kindle 3 was announced and I returned the Kobo and pre-ordered the Kindle. I think the Kobo is a good product, but a few things started nagging at me:
1) My right thumb got sore because the button was stiff and there was no way to change pages with the left thumb.
2) While very light, the button was located in the corner of the device, making it hard to actually hold in one hand (I have small hands).
3) Battery life, according to the battery indicator, seemed worse than expected.
4) The screen was fine, but I was able to appreciate how a slightly better screen would be nice in lower light situations. (I never directly compared the screen to a Nook or Kindle, but I did compare to a Sony 300 and felt they were similar in readability. The new Kindle should be better, though how much better is still unknown.)
5) I am a Linux user and it turned out that there is no straightforward way to get library books if you use Linux. This isn't Kobo's fault, but it meant that one of the strengths of the Kobo vs the Kindle was taken away.
I liked the Kobo, but when the new Kindle was announced and was almost as light as the Kobo and had better battery life, as well as hopefully being better on the ergonomics front, I changed my mind. In your case, it sounds like having both makes sense, since you really want to use the library feature a lot.
I should note that my Kobo came from a Borders store and they gave me a hard time about returning it (they said they didn't take electronics returns). The manager was nice and they eventually took it back, but it was stressful for me.
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