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Side by side in regular lighting good enough for an old paperback book and "built in LED" at minimum, the PW3 screen looks brighter and sharper. I'd guess it's IR (no extra layers) and the PW4 might be capacitive (reflected light attenuated twice and the transparent conductive layers diffuse the light).
A friend bought the PW4, I bought the PW3 in October, because I thought the PW4 sounded gimmicky and cost reduced. The raised bezel, IMO, helps keep your fingers off the screen.
I have an original Kobo H2O and my first eReader was a PW2, replaced by a Kindle DXG (thought it would be better for PDFs, it's pretty poor for PDFs, I use a 10" LCD tablet if reading a long PDF can't be avoided. PDFs are NOT eBooks!).
I also have the Sony PRS350. Really the 5" Sony PRS350 in pocket and 6.8" Kobo H2O original (better annotation export than any kindle) is a good mix. However the Kindle PW3 might be the best all round reading only eReader. I use Calibre, so can read ePubs on Kindle and Amazon Kindle mobi/AZW3 on the Sony/Kobo/Nook/Binatone etc in ePub.
Or export to RTF, fix stupid formatting and recreate an ebook.
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