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The contrast settings on the T1 won't really change the actual contrast of black and white. All you'll do to text is reduce the anti-aliasing and end up with text that has more visible jagged edges (and therefore appear less blurry) if you prefer to read that way.
Unfortunately, Sony released the T1 with a broken font rendering engine. Changing the default font (to Amasis for example, whcih does look very good) is a good way to ensure that text formatting (such as Italics) doesn't always (I find, often doesn't) work. To improve the visual rendering of ebooks on the Sony without glaring flaws, you pretty much have to embed the font in th epub.
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