I don't think buying for a chapter book aged kid is an issue. I wouldn't buy for the 5-year-old maybe, but that's because I do think the mechanics of tech can be extra barrier when they haven't managed the mechanics of actual reading yet
I do think you might regret giving up the epub. Most libraries are using Overdrive, which is mostly pushing epub now. It is trivial to remove---for now, anyway---and I have easily made such books work on my Kindle. But not everyone is comfortable with fiddling, and as an out of the box experience, it won't work for you on a Kindle.
On the other hand, my library (for example) has just changed its policy so that you cannot use your library card unless you show up in person once a year to verify your existence and continued eligibility. And I know other libraries have similar policies. So if you plan to purchase books and read free ones, the library issue might not be a deal-breaker anyway, in which case Amazon does have a decent selection. On the other hand, I have found every book *I* have wanted at the Kobo store and never run into 'I want it and only Amazon has it' except for a handful of times...
As far as cost, there are a ton of second-hand readers on Craigslist in my area. Most of thema re overpriced---why they think anyone would pay $250 for a used Kindle 2 when they can have a new Kindle 3 for half that is beyond me---but if you know the retail prices and bargain accordingly, you can probably score some deals on your local swap and sell board...