I have both. Started with a Sony PRS-505 and 10 months later added a Kindle 1 (which I sold the day the K2 was announced), now I have a Kindle 2. It took a while to get use to the Kindle after using the PRS-505 exclusively for 10 months. But I wanted to give the Kindle a chance and used it exclusively for 3 months. Now I'm back to using my PRS-505 exclusively because of 2 reasons, organization and page numbers. I'm reading a lot of series, in fact I just discovered the Breed series (paranormal romance) and it has 19 books.
I'm on the 11th book and I have them all in a collection folder in order with a description RTF document in the the #1 spot, so I have 20 files in the folder. It's so easy to go to the next book once I finish. I have smaller series in their own folders but this was a good example. The Kindle 2 has been picked up once the last 2 months (to update the new firmware). I also love the reflow of page numbers then location since I only read for my pleasure, I love knowing that a book is 300 pages in small font. The shuffling through pages is so simple, no bookmark necessary. For those the 2 reasons, I will be upgrading to a Sony Daily Reader and it will be my primary reader since I enjoy the Sony reading experience better then the Kindle. I do shop at Amazon for ebooks 60% percent of the time so the K2 is worth it.