Still reading through all the posts, so much .... Just wanted to add my 2c
There is no question that e-ink based devices will add more capability as the basic e-ink display technology is perfected. It is clear that additional functions, PDA like capability does make sense and would well complement the basic reading function. In a way eReaders might converge with PDAs/phones/other-small-gizmos over time.
For the short term he is basically right that the current high cost eReaders will remain a niche and basically wrong that people will prefer other electronics for reading because they have more functions.
Sure iPhone and iPods and other gizmos can do a lot of things. They can also eat their batteries in less than 24 hours and fail to maintain their basic functions like making phone calls!?!?! He also neglected to mention adverse health effects of smaller devices. The crack berry thumbs, eye problems with active screens, ADD, etc.
More and more those gizmos have all kinds of problems that are becoming increasingly annoying. Apple wants to control what apps you run on your phone. Service providers want to push ads. Nobody will let you replace dead battery, at least not easily. etc. Compared to niche market of eReaders where companies are much more responsive. we actually post requests for next firmware or next hadrware version and *EXPECT* companies to listen. Try that with Apple
eReaders do/will have a role to play, albeit not a mass market size. Still, they will maintain a sizable market space, things like education, healt, and even some general public reading books market because they are well designed and suited for reading even if not answering to all the other ADD functions (watch videos, IMs, etc.) The lack of that bling bling (colours please) *IS* a feature!
For instance, I was happy to give up all my Palm Zire71 PDA functions to gain 2 simple things - better screen (my eyes hurt) and long battery life (PDA going dead when battery becomes old). So I think his piece is more or less correct, but too critical. The multi-super-mega-functional gizmos themselves are have increasingly more problems which will make them less appealing.