I think they will eventually, but right now the cost of a device and books compared to the cost of books from Scholastic, the benefit of supporting schools with Scholastic purchases, and the lack of care my 7 year old son shows his possesions, has the paper books ahead of an ebook reader by a very large margin!
I'm thinking about downloading a book one of these days to try him out on it. I'm not sure what kind of a book would interest him though. He has read all of the "Wimpy Kid" books and is really big into anything Pokemon right now. I've tried to get him to read some books I remember from his age, but since I'm a girl they might not necessarily interest him.
My 4 year old daughter has a
V-tech "V.Reader".