I have demoed the Sony 505, 700 and the Jetbook together at J&R. I went in tonight to seriously look at the 700 that I had previously avoided because of price. I wanted all the features that it has over the 505. I agree with your conclusions and think that someone at Sony inexplicably botched the screen design on the 700.

The decision to go with a touch screen is not the problem that causes issues with the clarity, but it was the decision to use a matt finish which messed things up. I have used glare-reducing screens before on my Palm and have found that these finishes do not reduce glare but dull it and spread it out over a larger area using light diffusion. Therefore, there is actually no real overall benefit. However, the matte finish also reduces clarity and the farther away it is from the surface, the less clear it becomes. It appears that the touch screen surface on the 700 is quite a ways distant from the e-ink section. Had Sony left the surface clear, as Apple did on the iPhone and iPod Touch, I believe the glare would still be there but it would be much easier to manage since the reflected areas would not be so large and the clarity would not have been affected. Alas, it is doubtful at this point if Sony could admit the error and produce a new, improved one anytime soon.