I'm very happy with my Gen3. It does hang very occasionally, but only on boot, and always resets (though I forget, from time to time, about the fact that resetting doesn't blank the screen as it does with "ordinary" devices
). Otherwise I've had no problems (and never felt the need or desire to update the firmware). I am very gentle with it, but it seems to have survived fine.
If I was looking to get one now, I'd seriously consider something like the Opus (or with ePub support). That doesn't have mobipocket support, so if you were happy format shifting (as EowynCarter suggested), that might be worth considering. I saw one at a meetup, and it was very pleasant, far more so than I'd have thought given the slightly smaller screen.