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Amazon offers a large content but mobileread and gutenberg offer thousands of public domain books for free. You'll likely have to pay Amazon for these texts (if you like classics, Shakespeare, Dickens... are all free)
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Gutenberg and Mobileread non-drm books are as available for Kindle as they are any device, even if they weren't available in mobi format, which they are.
Amazon has 1.8 million free public domain books, and I doubt that is limited to the classics.
The library issue is valid, though.