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As someone already mentioned, the Nook has a 750 MB partition for downloaded content. Unfortunately, there is currently no scheme to allow additional items to overflow to the rest of the internal memory or to an installed microSD. The latter would come in handy.
Not that I can image needing access to more than ~1000 titles at once. Though I can see how it's not so much having access to your entire library, but that one title you want right now and it's not accessible.
Haven't run into that problem yet, but I'm sure some day...
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