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I'd suggest that you also invest the very reasonable amount ($10 I think) in a pouch such as the Nintendo DS case which was mentioned in the Accessories sub-forum, for protection when it's simply sitting in your backpack. I'm going to look into that when I go on vacation, and may well look into a different type of pouch which might have room for a rigid case along with the power supply, all in a single pouch.
Extended warranties are great if you actually need them, just as with any insurance, but they are a waste of money if you never need them. Every extended warranty I've been silly enough to waste my money on has expired long before the equipment had a problem.
If the companies couldn't make a hefty profit on them, they wouldn't offer them, so be sure that it will be a good balance of cost/benefit for you.
As a suggestion, you might start a thread which asks how many people on this have broken their Readers, how much the repairs have cost (if they weren't covered by waranty) and ask those who have responded 'yes' to tell you how their Readers broke.
You may find that they are indeed rugged enough to survive backpack travel as long as you take a few inexpensive precautions.
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