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The Engadget article linked above in this thread had links and I followed links to Jeff Bezos comments about a color Kindle and also comments about the color prototype by the supplier to Amazon, Sony, etc.
Reading between the lines, it seems that what makes e-ink "paper-like" also makes it poorly suited to color and any application of color that makes web sites an "advancement" over magazines.
This seems to explain why B&N chose a) to use a small color touchscreen to control their b&w e-ink screen, and b) to use a color LCD for their "Color Nook" designed for magazine-like reading.
With the rave reviews of the 7" Samsung tablet, color e-ink displays would be directly compared to tablets.
So, e-readers will likely continue to be black-and-white, because then they will clearly be different from tablets, and justifiable for a different use.
Another way of saying this is that e-ink displays are used because they are better for text than LCDs. If color e-ink displays are worse than LCDs for all the additional capabilities that they add (pictures, etc.), then adding color to e-ink is a step backwards. I think this is what Bezos is saying.
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