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I don't have any direct experience with library e-books, but everything I have seen on the subject indicates that you will not be able to read "library" PDF's on the iLiad. These are Adobe e-books, which require just the right kind of Adobe software to read.
You should be able to read the library MobiPocket e-books, but only after you register the device and only for future library e-book downloads. Assuming these work the same way as standard MobiPocket DRM, the ID's of allowed devices is encoded in the file. You should ask your library how they handle new MobiPocket devices. In this regard the iLiad is no different from (say) a new Palm Pilot with MobiPocket Reader software. If you normally connect to the library using MobiPocket's Windows Reader, the process of adding the iLiad might be completely automatic.
Note that the Bookeen Cybook is cheaper and also supports MobiPocket.
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