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The navigation button was enormously improved in the "version 2" Gen3 (when they increased the memory from 64MB to 512MB) which came out last May. True, it doesn't have many buttons, but why would one want a lot of buttons? The only thing one does repeatedly is to turn pages, after all!
A firmware update is due for the Gen3 next week which should add folder and ePub support, and will probably improve PDF support. (Note that the Kindle has no PDF support at all!) Neither the Sony nor the Kindle support folders, although the Sony has "Collections" which are a sort of "pseudo-folder".
SDHC support is pretty irrelevent. I have over 300 books on my Gen3 and am using less than half the internal memory, let alone an SD card.
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