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Ereaders typically do not have the ability to create text, per se. They sometimes support note-taking, but not creation of documents from scratch.
PDF files typically require a larger screen, since they are usually formatted for a larger page size (8.5 x 11 or A4 size). They usually do not work as well on a smaller screen. The iPad is probably the smallest screen that works well for PDF. You usually have to scroll or zoom to see the whole page. I think I've heard people say that Sony supports reflowing PDF documents, though. Kindle does not, if you want that, you have to convert to .mobi format. Any reader you consider, you should research what people say about its PDF abilities, in particular.
.txt files do no line-wrapping outside of just carriage returns in the file, so they often display oddly on a smaller screen, since the line length is usually longer than the screen. Unless you use a really small font size, or turn the ereader to landscape format.
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