Thanks for everyone's advice. I was able to de-authorize the device by calling Sony. They said that you have to call to de-authorize in they set it up that way on purpose. I also told them about the pixels and they too said the screen was defective and I should exchange it.
I went to SonyStyle, showed them the screen and they happily exchanged the Reader. This one is great, I don't see any pixel problems. Plus now I have the lampposts picture back again so I'm a happy camper. Thanks again for all your responses, this is a great forum!
ps. I didnt know that about the library will definitely check it out. Thanks for the tip!