I find the Kindle 2 size to be the perfect size for reading regular books. The screen is big enough and it keeps the reader light and it can easily be held during longer periods with just one hand. I only read on my phone when in cramped places and for me the screen is too small to be any good for longer reading.
If you're a night reader you might want to consider that devices with physical buttons will have a click sound when turning pages. This can be annoying for a partner trying to sleep. I've heard users here at MR saying that the click sound from the Kindle 3 is less obtrusive.
For me the click sound on the K2 is hardly noticeable.
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