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I don't have a Kindle 2 but I can answer a few of your questions.
The Kindle 1 has 256MBs of memory. On mine I have 107 books (and a few collections count as 1 book such as the complete works of Edgar Allan Poe, William Shakespeare, H.P Lovecraft and the complete short stories of Ernest Hemingway), 5 magazines, and 2 samples. I still have 41 MBs free.
Books are surprisingly small and even so, you can redownload any book you purchase from Amazon any time you want. I usually move the books I finish to my computer for backup since there is no real reason to carry around my entire library.
I have three free bibles I got from Amazon:
Holy Bible, Today's New International Version, TNIV = 5.65 MB
Holy Bible, GOD'S WORD Translation (GW) = 1.72 MB
The Holy Bible English Standard Version (ESV) = 5.65 MB
With the Kindle 2, I'm pretty sure you have to mail it back to Amazon and they will replace the battery for $60
- edit If you want expandable memory and a user replaceable battery, you may want to look into a used Kindle 1
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