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For your tablet needs, it sounds as if you need a "proper" tablet rather than a reading device. The tablet which dominates the market - with good reason - is the Apple iPad. I'd suggest taking a look at that. If a new iPad 2 is out of your price range, you can get excellent deals on the older iPad 1 these days.
On the reader front, I'd probably suggest the Sony PRS-T1. It has the benefit of being able to borrow library books using WiFi, rather than needing to use a PC. The Kindle is excellent too, yes; Amazon have by far the best eBook store around, lots of "freebies" and special offers, and their customer service is second to none. It really depends how big an investment you've already made in ePub books.
You really can't got far wrong with either a Kindle or a T1.
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