I would upgrade ... and I did.
The number of colors isn't really that important. However, you will see a huge improvement in contrast with the newer Pearl-display. The older Vizplex-display, which is used in the iriver Cover Story, has a contrast ratio of 7:1, while the newer Pearl-Display features a ratio of 10:1. That's nearly 50% better and you will notice it right away if you're seeing those displays side by side.
You don't need to buy the PRS-T1 ... For mangas there's actually a better alternative IMO: the iriver Story HD. Its displayresolution is much higher than on other readers, which will especially be visible on images.
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