I do like a lot of these KISS ideas. Hardware wise, a different storage medium I think would be the biggest help, and then a little higher resolution would be nice, especially for the stylus--I take quite a few notes, so a touchscreen that rendered strokes very precisely would be a boon.
Otherwise, I think it'd be a great upgrade to have two more "soft" buttons on the top of the page next to the markups button that is already there. I'd like to see the eraser split to the middle button, and the search/dictionary function split out to the far right button; the remaining two markup functions would remain in their current spot, but the button would now be a toggle switch instead of a dropdown menu. That is, tap the markups button, and the function would just flip instantly between pen and highlighter. Sounds like overkill perhaps, but these small UI changes would save a few mental cycles and would be a smaller reading interruption since the user would only have to click these buttons once for a new function without having to think about clicking the markups button, filtering through the options on a drop down list, and then clicking on the desired option before finally marking up the text. The nice thing about these changes is that they would only require a little software tweaking, I would think.
Oh, and as far as file management, it would be awesome to have an automatic synchronization system back to the computer, such that a computer-based IMP-viewer could display all your notes and jump to them instantly like the eBookwise does. This would be huge for those of us who have to write papers on the material we're reading. It'd also be nice for someone who just wants to re-write his notes in fuller form on a word processor later so as to better remember a text. I know you can kind of extract notes now--I've not tried it yet as I haven't received my smartmedia cards in the mail yet--but it sounds like a bit of a process.
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