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The Kindle Touch is a much better device, in my view. As you say, it's smaller, and the soft keyboard on the touch screen is much easier to use than the fiddly little rubber keyboard on the KK.
I would sound a note of caution, though, about using any eBook reader as an audio player. The music management capabilities of the Kindle are primitive in the extreme. It would be much, much, better to get a book reader, and a separate MP3 player (they are very inexpensive).
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