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The other advantage in this case is that if the fiction is on the web you can always go to it with the Kindle without downloading anything. The Kindle web browser isn't the greatest, but when it's dealing with pages of just text it's just dandy.
i'd pick the Kindle... the conversion is just a simpler, faster process and even if you pay (.10) it's hardly much of a cost. I send academic journal articles to my device all the time... they're in pdf and even they come out great. I like the Sony Reader but when I had one I spent SO much time converting files for it. I hardly ever spend any time converting for the Kindle.
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