I could be wrong about this, but I think what Amazon loses in individual sales of e-books, they plan to make up in volume. People with ereaders tend to buy more ebooks than paper book readers buy paper books. I tend to believe that Bezos is a smarter guy than to give away the store in order to satisfy people who want to buy e-readers. There
has to be more to the story, because selling e-readers in order to take a loss on your main business (books) would qualify Bezos as psychotic, and if that's the case, whoever has his power of attorney should take over the company immediately. It just sounds extremely unlikely to me.
This
NY Times article makes a lot more sense to me.
It could be that I'm completely misunderstanding what you're saying, but it doesn't look to me like they're looking at the Kindle as the main product. It looks to me like the e-books are the product. Yes, the freebies are there to get people interested in getting Kindles, but the Kindles are there to get people buying ebooks. If the Kindle was really their focus, all of the Kindle apps on other platforms wouldn't exist (which is also why Apple gets a bug up its ass every time some other device manufacturer (c.f., Palm) wants to sync with iTunes).