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I think you've done most of the work on finding pros and cons. I think you know enough to make a decision. All I can add is my personal expwrience.
I have the 505 and I really like the device its main advantage is price portability and format support. Like you I read a not of nonfiction. As for annotating the dvlevice is lacking. For note taking I've resorted to carrying a pen and sticky, not the best solution.
One thing you are overlooking that is VERY important is lighting. As a college student I read a lot when it was dark. Having a built in light is huge. Portable lights are not any good because of the glare on the screen. The 700 has a builtin light the 505 has the light wedge. I have the wedge and it is worth the price.
Content is king. If you only read philosophy abd religuos text from long dead author your fine with any book device. However if you read modern works amazon has the best selection, for non fiction. With fiction the gap is closer.
Amazon has the best prices they never have sales but are routinly 40% off list price. You can get better deals with fiction wise but you have to wait for their awesome sales but their nonfiction stock is not very good.
Conversion this site has a great myriad of tools to convert this format to that. Converting doc/html to Sony of kindle is trivial. What is not easy to convert is PDF, unless it is pure text. Regardless sony by far has the best PDF support. The 505/700 both have what is called reflow. If the default layout is to small for you to read you can increase the font. This will reflow the text and make the PDF look more like a text page vs a PDF. The reflow usually looks worse but at lease you can read. There are also tools built for the sony device that convert pdf to optimised image based pdf or lrf for the sony.
Based on your needs I would not recommend the 505 as an annotating device it is just lacking. Based on your needs I think the 700 is the best solution. The built in light PDF support and annotation mechanism will make this device the most sutable for your needs.
The kindle has content and that is huge. It also has a keypad which makes annotation easier than the 700 there you have to type on the screen
Well that is all I have to add good luck with your purchase. In the end let me say regardless of what device you choose you will be happy.
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