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For reading, I go the route of choice 2. I like to have just one specialized device that doesn't really offer a bunch of other functions to distract me from my goal of consuming books.
For other things? I kind of combine the two choices... I have a PS3 that I use for gaming and movies, a sanza fuze that I use for music, and my lappy that is used for work and emails and browsing. I also have a smartphone for the pint-sized version of all of those if/when need be.
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