It's pretty common for typographers to distinguish legibility and readability, as they have done for many many years.
Not sure why that's immediately relevant to contrast on e-ink screens.
Extremely high contrast is vague and on reflective screens, is constrained by a few factors. On a global level (meaning full black versus full white), e-ink could try to increase the overall surface reflectivity (which would make the "white" whiter, but the black grayer), it could try to reduce the reflectivity of the black particles (making the "blacks" darker, which could be good since they are nowhere near ink black except in low-light, much closer to dark pencil gray).
They could also improve the dynamic range, which allows more fine-tuned font smoothing and anti-aliasing, which increases local contrast significantly (in practice most fonts are never full-black on e-ink since significant areas of the letterforms are faded to a gray to improve perceived clarity and reduce pixellation). These things actually make e-ink's blacks, which are not very strong in the first place, even weaker.
As far whether or not there's a practical limit to contrast improvement, I think most casual observers would think so. Trying to read bleach-white paper in bright sunshine is a great way to get a horrible headache, though it can be a godsend in less optimal lighting conditions.
When people like me say we want more contrast, we generally mean that in mediocre lighting conditions where a cheap paperback is still readable, e-ink struggles to reflect enough light to remain readable; and some fonts at normal reading sizes, and for me especially in more visually-complex character sets like Chinese, many characters exhibit such low local contrast due to the weak black and heavy-handed font smoothing that their illegibility actually becomes conspicuous enough to interfere with reading. Thus, I've had to typeset most of my Chinese books in heavyweight sans-serif fonts which I dislike due to their mediocre readability and general visual appeal. I need to also typeset my English novels in heavier, lower serif-contrast "caption" sized fonts, of which some of my collection still only barely work due to the presence of more oblique lines that conflict with the pixel map.
I don't think electronic paper will come anywhere near a contrast level that could be considered "excessive" in quite some years. It currently is still a few steps behind even my cheapest paperback paper/ink combos (my cheapest are Terry Pratchett's books published by Harper) in pretty much any light. I've seen some faintly printed inks though that can give e-ink a run for its money in the illegibility department. I just won't buy books like that.
Addendum: When I wrote this, I must have been intensely sleep-deprived because on rereading it barely makes any sense. I'll have to rewrite it sometime...