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Well, If you want a combined device, and don't mind reading on a LCD, then the iPod Touch is probably the best option on the Market. It's easy to use and has a number of reading apps available for it.
If you want to stay out of the apple ecosystem, then you could consider getting one of the Nokia Internet Tablets. The N800, while an older model starts at $200, and you can install a number of apps on it. The disadvantage is that being a linux device, you can't read any protected files on it, and it can be bit geeky.
Personally I'll suggest splitting the two devices, and getting another Prs 505 and a separate MP3 Player.
If that's not an option, and reading is the main priority, the MP3Player on the 505 is basic but usable, and you can always test out the quality and usability on your existing one.
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