that is a ideal evolution of a device. I really like it...given the newest processor power, online office apps and email and combine that with the MS pen input and/or a solid speech recognition app, Win7 w/Aero, the resurrection of the "old" MS Reader software and I LOVE this device.
If there really are color eink as well as other outdoor readable display tech (must be color) I would LOVE carrying this at times, my recreational reader at times and often both...and if you add a real system architecture rather than the kludge that ereader devices are today, I cannot see this not eventually coming about.
And do not underestimate Microsoft Surface:
http://www.microsoft.com/surface/
Apple is likely going to eventually spring board their dual-touch tech in the iPhone and Touch as something just like the device in the OP....times get more interesting every day.
BTW, I do not see this as a replacement for my casual reader, but as a very sweet portable device that when combines with whatever cloud computing becomes...Google will indeed be a player here as well.