I totally understand because I like to have all my books on my Kindle too
Luckily, I still have room on the PW for now but the plan when I run out is to keep my to read pile on there as well as my favourites - any books that were just an ok read will have to live in the computer only. And if you don't use it already, have a look at Calibre which makes library management a breeze.
Annoyingly the PW only has half the memory of the K3 and I am really hoping that when the time comes for me to get a new reader, Amazon will by then either have put in a much larger on-board memory or the holy grail: a card slot. If they don't then I'll probably have a good look around at what else is available then.