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I am now on my 3rd Kindle that I just got on Friday and the same issue is occuring and it is driving me insane.
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I have also been through three Kindle 3 Wi-Fi units. After the third one went into a spontaneous-reboot loop 5 hours after I got it (and 5 minutes into use), I had had enough. I asked for a refund and was promptly given one. (I have no complaints about Amazon C.S. except that they can't really do anything but authorize a replacement or refund.)
In my case the problems varied slightly on each of the three units. All three experienced spontaneous restarts and freezes. All regularly required me to do a 15-second hard reset if I hadn't used the Kindle in more than 30 minutes or so. I also experienced blank screens, rapid battery discharge while in sleep mode, loss of proper time, loss of last page read, and so forth. If you read other people's accounts, all but the rapid battery discharge is described fairly similarly. I don't believe that anything the user does precipitates the problems. It acts like a bad memory chip, random corruption of data or code in memory.
I've got some experience testing beta computer hardware, apps and operating systems. I tried everything looking for an operational or usage pattern, including checking the validity of the indexing and only keeping one book at a time on the Kindle. Amazon support told me they were sure it was not any usage pattern of mine, anything about my profile, or anything about my books. I don't store anything but books and I've never performed unsupported customizations. I also experienced these problems with firmware versions 3.0.1, 3.0.2 and 3.0.3 early preview, so it's not a faulty firmware patch. (Although I fully believe people who say their experience changed one way or another after a firmware update -- for me there was no change.)
I have a suspicion: I believe that Amazon is fulfilling support replacements out of its returns. They are aware of this problem but they don't know for sure what's causing it. They go through a checklist and diagnostics on each return and then recertify it if it passes. It's an intermittent problem, though. So their check-in might not catch it.
My guess is that there was a hardware issue with an internal component. If you ordered anywhere from August through most of October, they were on back order then. Not everyone got this "bad batch" of Kindles. But if you're relying on support replacements, you're more likely to get a bad one. That's my theory, anyway.
As mentioned above, I just returned my third Kindle latest generation for a refund. My plan is to wait until the credit appears and keep watching the forums like this one -- looking to see when the complaints die down -- then I'm going to reorder it. What I've noticed is that the complaints have already begun to diminish. My hope is that that's an indicator that the problem has been resolved with units manufactured after a certain date.
Despite all the problems I've had, I vastly prefer the design and screen of the Kindle 3 over all previous models.
It might be useful if those people with Kindle 3 problems posted the dates they ordered or received their Kindle 3s. I received my first one on Sept. 16.