there is a California public library using Kindles for in-house reading (not circulating). Here is a write up I did on it for the Facebook group Ebook Readers in Libraries:
California's Rancho Mirage Public Library now provides two Amazon Kindles to their readers.
In an article called "Rancho Mirage library offers new device for 'electronic' reading" Steve Moore writes in the August 5 Press-Enterprise about the new service.
http://tinyurl.com/5konlt.
You can also read the library's press release at:
http://www.ranchomiragelibrary.org/pdf/KINDLE%20PR.pdf