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With a proper touchscreen the Sonys can afford to be a bit more expensive than the Kindle3 as long as the 350 is under £150. Sony will never be able to compete with Amazon's ecosystem, so the whole issue of wireless connectivity is moot - the Kindle will always be a better choice for those scared of computers.
I have 200 books on my 505 and still have almost 60MB free, so internal flash capacity is a bit of a non-issue, but I suppose they have to play the numbers game for the spec sheets.
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