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desertgrandma brings up a lot of good reasons why migrating from a K1 to a K2 doesn't make a lot of sense. I agree there doesn't seem to be a compelling reason to get a K2 if you already have a K1.
Personally I find the complaints about the battery and the storage to be overblown. Mainly because of the majority of folks that I've heard complaining about the loss of those features also say that they've never used those features.
What you need to decide is which is more important to you - price or ergonomics? From the reviews I've seen the K1's angles can be uncomfortable to hold while form of the K2 may be more comfortable for you to hold. Of course the cost of a K1 on eBay is pretty compelling.
As for the Sony PRS-700... Avoid it. If you're going to consider a Sony look at the PRS-505. The screen on the 700 is awful but the 505 isn't a bad device.
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