I suppose if the SDK for the iPod Touch really does come out in February, the suitability of the iPod Touch (or the iPhone, for that matter) as an ebook reader could change very quickly. As I understand it, a stock Touch can only read books served from a web server through wifi, but I would guess that will change with the release of the SDK. And if FBReader (with new ePub support) is ported to the Touch, I think it could be quite a contender. I'm pretty sure my daughter (the ebook and web page junkie) would want one. Badly.
I would think Mobipocket would want to consider porting their reader as well, as they've got a Java version, but Amazon may block that.
I wonder if Apple would consider buying or partnering with eReader? That could be a very powerful combo. eReader doesn't sell its own hardware, and Apple doesn't already have a supply of ebooks to pack into the iTunes store. There is already a version of eReader for OSX, so it shouldn't be too troublesome to port to the iPod Touch/iPhone environment. I would think a deal like that could make both Apple and eReader buckets of money.