E-ink displays are capable of displaying video, though the chips that drive the display in the Kindle may not be able to do it. See a demo here:
http://www.youtube.com/watch?v=24srQXX81Oc. In the device shown, the hardware and software drivers can update a small portion of the screen instead of rewriting the whole thing. In the Kindle the progress bars that are displayed when rebooting or loading Duokan may be updated using localized addressing or may be done by refreshing the entire screen, so it's still hard to say what the driver chips in the Kindle can do.
To do any serious word processing you'd need a way to connect a keyboard and appropriate software support in the Kindle. Both seem unlikely to become available in the current hardware.