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No, I don't see it.
We have spent a generation getting AWAY from having to go out and buy and store individual pieces of media of all kinds, there is no reason to go back to it.
The small target market you describe, as mentioned above, most likely does not exist, as they already have and are happy with paper books. If the market exists at all it would be far to small to get any economy of scale for either the reader or more importantly the content.
There are children's toys that use custom one-book-per-cartridge media. They are expensive and nothing to write home about.
An integrated book store over free wireless, like a 3G Kindle, is the easiest solution for the people you describe who want ebooks...as Amazon and B&N have already proven over the last few years.
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