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I suspect that the market for a colour tablet that does email and web access well, and that manages a wider range of content as well as Amazon already manage ebooks, is much bigger than the ebook reader market. With their ability to advertise Kindle on the front page of Amazon.com endlessly, I bet they sell a gazillion of them.
I doubt that they will abandon eInk dedicated readers until there is a screen technology that does both video/browsing and sunlight-readable text without compromise. Their strategy so far has been to make their content available through as many channels as possible - it would be mad for them to drop one without good reason.
It seems to me that this is an iPad competitor, not because it has similar specs or the same capabilities, but because it has the potential to do enough, and to "just work" for the key features people want, while being half the price.
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