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Yeah, any tablet device (apple or otherwise) wouldn't be any kind of industry killer. More a niche device aimed at academics (like me), the business crowd etc. that want something they can take notes on with stylus, mark up PDFs and other documents etc. Maybe down the road when better screen and battery tech are out. But even then I think there will still be a market for cheaper and smaller dedicated readers.
As for iTunes for books, most rumors have suggest apple doesn't have an interest in selling eBooks. I suspect any tablet to just access the Kindle store and/or other stores with apps--ala the iPhone/iTouch.
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