1. Right now, the annotation works... just not ideally. If you zoom to a level where you have to pan around the journal article in order to see new parts of the page, the annotations don't "anchor" to the text... they move as you pan, remaining in the same position as the screen. Rumor has it (via a conversation with tech support) that this will be fixed in the next month or two.
I use the EE almost exclusively to read scientific articles. It works fine, as long as I don't zoom in more than allows me to see one whole page at a time. Reflow does not work well because the figure legends get incorporated into the actual text of the article. Other users have suggested opening the PDF on both the eInk side and the tablet side. You can zoom as much as you like on the tablet side, then make your notes on the eInk side. Many users report that this works well.
Though not perfect, I have found the EE to be IMMENSELY helpful as a scientist. It has radically decreased my printing and the weight of my briefcase. Also, enTourage as a company seems like it is really striving to fulfill the needs of its users.
2. Yes, though the resolution of the annotated PDF is less than the original since it is saved as an image. This is not problematic, but is a tiny bit annoying.
3. Super easy. Dropbox plus the tools that come pre-packaged with the eDGe (USB support, SD card support, etc.) have made it very easy to do. I transfer a lot of papers, and dropbox makes it very user friendly.
4. No issues yet, but I encourage you to buy the cleaner. It smudges quickly. (Or, I am very, very dirty

)
Hope that helps!