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I "replaced" my Sony PRS-505 with a Kindle 3 (Keyboard) when all the UK ebook shops stopped selling ebooks to people outside the UK around October 2010 and there weren't any others yet available that actually sold me anything in epub format. As Amazon seemed like the only option at the time and I didn't have too many epub books bought yet anyway, I went for a Kindle (although I realised I could de-DRM files).
The K3 did have an improved screen, which was a bonus and did matter to me, too.
I've been tempted by a number of new readers since, the Sony T1 more than any others (it's really the only touchscreen reader I've seriously considered, as it has page turn buttons - the Nook seems nice but I'm not American), but I've yet to give in. My K3 works beautifully and I don't think I need a new eInk reader until there's something with an even better screen out there.
I might be tempted by one of those new/rumoured front-lit ones once they're actually out, but as long as the Kindle Touch doesn't have page turn buttons, I don't think I'd want that even with good front-lighting. (I really loathe fingerprints and smudges on my Kindle screen. I know many people say they can't be seen at all on the matte eInk screens, but ... I can see them and they irritate me much more than the prints on my iPad or smartphone screen.)
I might buy a few latest generation eInk readers if it ever seemed like they were on their way out in favour of tablets / LCD readers. I really dislike reading on either my iPad or my phone, so I don't consider those viable options for me.
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