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I don't really think the main value people see in e-readers is the portability per se (a lot of books are pretty small, and those that aren't I think will be bulky even in this form), but the ability to have hundreds of books at once in a reader, and the ability to buy ebooks instantaneously without setting foot in a store.
As for what really would be a Kindle killer? I think an e-ink Android tablet, under $150, like a rooted Nook STR without the need to root. It would be able to truly replace a Kindle by using the Kindle Android app.
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