Like some others, I don't use an SD card because I remove books once I've read them.
The SD card in Kindle 1 was not easily accessible. Making it easily accessible would be my first choice. If not, then I'd rather have the additional memory built on board rather than use an SD card.
So I don't see see having more built in memory versus an SD card as a compromise between the Kindle 1 and Kindle 2.
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