I upgraded from a PRS505 to a Kindle 3 (via a Kindle 2) and don't regret it for a minute. Even without the Amazon infrastructure and syncing, the screen was miles better, much crisper, and (the deal breaker for me) a MUCH better range of font sizes (even on the Kindle 2) - I did find the 3 on the Sony a little limiting as my eyesight has deteriorated - there are about 8 on the Kindle, sometimes I change depending on lighting and situation (on the train, in bed, wherever).
I did have a look at the new Sony 350 and 650 in the Sony store but, to my eyes, still found them a little fuzzy - one of the reasons I don't like that type of touch screen.
I haven't weighed the Kindle 3 vs the Sony 505, but I think the Kindle 3 is lighter, you are correct about the bulk of the Kindle 2, the weight is more comparable.
I converted all my old EPUBs with Calibre and am a happy camper.
I just need to pull my finger out and sell my 505, 300, and Kindle 2 on EBay sometime!
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