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The crack is in the screen substrate - a very thin layer of glass that's behind the outer plastic screen. You can't see a substrate break visually, but the visual effect of it on the image is entirely distinctive.
Having owned both an iLiad and a CyBook, I must, with all due respect, disagree with your assessment of the iLiad as being "light years ahead" - at least as a fiction book reader. The implementation of the MobiPocket Reader on the iLiad is rather primitive.
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