My hubby and I only just bought our first e-readers (both eInk) this month, so I don't think the market is over-saturated. Now that the price of the devices/technology is coming down, you'll get more people like us who wanted something that was easier on the eyes than an iPhone, iPad or computer screen, light and portable for traveling and cheaper so that if it gets lost or damaged it is easier to replace.
I have an iPad but I don't do much reading. I use it mainly for browsing Facebook, Pinterest and light reading of internet articles. For eBooks, it was not going to "cut it" for me, plus my eyes get more tired these days with LCD screens.
There is also the basic fact that if you pick up a tablet/iPad, there are SO many things on it that will distract you from reading... a notification that lures you into Facebook or your email, that latest Angry Birds app just waiting to be played...
And yes, when it comes to the mainstream tablets, I think one of the earliest posts on this thread put it best: Jack of all trades, master of none.