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Very interesting ideas above. Let me add my thoughts:
1: Dedicated devices are not going to become mass market unless very, very cheap (50$) - comparison with music is not valid since for music you need a device to listen to it, for books you do not need a device to read; also music is one dimensional, a stream of sound, so ergonomics considerations are quite different than for books which are 2 dimensional
2: The main reason people do not like to read novels from pc/laptop is not the lcd screen, but ergonomics - you want a comfortable position, you want to lose yourself in the book...
3: There are lots of things about books that have been ingrained in human culture over centuries (unchangeability, ability to read anywhere...) that are going to be very hard to overcome unless the alternative offers extraordinary benefits.
4: To me the proposition that people as a mass are going to pay 3-400$ for a device for the privilege of reading 10$ books that they do even fully own is mind boggling. Sure, some are doing it for various reasons, but to extrapolate from that to millions it's a big stretch.
5: E-books as a commercial proposition, rather than a hobby need to show extraordinary benefits to people for mass adoption, and right now that is quite far away.
6: When your business model is open the slushes, let everything to flow and swim or sink, I think that your number one worry is that your product stands out in the waters, and there e-books can be very helpful; Baen is the best example here since e-books were the main reason it succeeded in building itself up from a paperback house to the healthy sf imprint of today.
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