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Smashwords, feedbooks, and gutenberg all have free ebooks; a 10-year-old may have interest in several of the young adult public domain books.
The biggest issue with giving an ebook reader to a child is impressing on them the fragility of the device. It's not that ereaders are particularly more fragile than other electronics, but one wrong tap can shatter the substrate; they're not designed with much tolerance for being banged around, unlike MP3 players (often designed with athletes in mind; expected to be shoved in a pocket with keys while jogging) or video games.
Decide before you get it what your reaction would be to it getting accidentally broken in a week. (Because even with the best intentions and care, sometimes a person forgets and sits on an ebook reader.) Would you replace it -- once? Not replace it, and leave the kid feeling he'd destroyed his nice present? Make him somehow work of the debt of replacing it?
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