Since I'm still using my Sony PRS-505 -- my first "real" reader, I'm going to say that no, I don't updgrade my devices for new ones.
I do have a Kindle 3 (w/keyboard) because I wanted a second device to leave in my computer bag all of the time, but I don't think that was so much an upgrade (the screen is much nicer!) as it was a convenient addition.
I would not replace my PRS-505 with a Kindle -- except for the screen contrast and battery life, I think that my Sony continues to be a better device.