Well I was confronted with this question and I bit the bullet and got a Kindle 3.
For the money I spent (~A$280) which got me a 3G Wifi model and a lighted cover, I think it's heaps worth!!
What I do to the PDFs is actually resize the thing on the Mac. I recognise I cannot read more than 3-4 papers in a day so I have a collection on the Kindle called Endnote. I basically pluck out the 3 or 4 I want to read from my endnote library, resize them to perhaps 110% of the original and I get rid of the hard margins on the Kindle and voila, it's readable.
Now it's not ideal but it's increased the size of the text quite well for me. It's like reading size font 9 on a computer screen. I can always use the zoom function for graphs.
A Kindle DX would have been perfect but the size of the thing is a little too much to be absolutely portable. I do still think the real estate on the kindle 3 can be put to better use and an extra 5mm each way would have made its size better for PDF reading.
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