Not sure why I would need free shipping on Kindle books, I do expect the Kindle to be free at some point in the future though. Cheapo plastic Kindle, but able to read ebooks nonetheless, upgrade to new and improved kindle with streaming video functionality for undetermined price.
Just remember, nothing is free. Every Kindle is connected to the soul of its constructor.
I would expect a "Buy a couple ebooks get a free Kindle" promotion first, but the problem with that is I don't know if the masses will want that kind of thing, having not read on the Kindle beforehand. The gift card is a concession, and will probably be the thing that occurs.