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There's nothing wrong with the 505 - but if you must 'upgrade' go Kindle 2 rather than 700.
There is no point buying a more expensive device with an inferior screen.
The primary function of the device is reading, so all the other functionality should (in my opinion) be judged on how much it improves the reading experience. Some of the 700's features really do work well - but I think the screen quality outweighs it.
If I had not seen a 505, I wouldn't have been as concerned about the 700 as the screen is better than an LCD. But having seen the 505 I've got a minimum benchmark for screen quality, and while the Kindle 2 looks to exceed it neither the Kindle 1 nor the 700 do.
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