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Hi Dicky,
Having owned both, perhaps I can offer a little assistance.
The iLiad is more like a conventional notebook PC than a dedicated bookreader. It has a fairly long boot-up time (45s), a fairly short battery life (12-15h of usage - considerably less if you use WiFi or the stylus a lot), and you can install your own Linux applications on it. It's excellent if you want to read A4 PDFs, but its version of the MobiPocket reader is a little primitive. Carrying it around is a little like carrying around a small laptop, in terms of size.
The Gen3 is a lot smaller (almost exactly the size of a normal paperback book - but thinner). It has a much shorter start-up time (around 25s - but you can leave it switched on if you wish) and a much longer battery life (4-5 days if you leave it switched on - weeks if you switch it off after each reading session). It's not at all good for reading PDFs on, but its Mobi reader works very well indeed and is a lot "slicker" than that of the iLiad. It's small enough to carry around with you everywhere you go.
I sold my iLiad and replaced it with the Gen3. I read mainly fiction on my Gen3, and for my uses the Gen3 is definitely a LOT better than the iLiad.
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