I've tried removing a card while the unit was off. This resulted in a serious anxiety attack -- I was afraid it might never work again. I finally found the reset button and all was well.
If I insert or remove a card while the unit is on and at the book list page, it simply thinks about it for a moment (an icon of two arrows chasing each other in a circle) and the new index appears. *All* books retain their places.
I've never tried it with the Connect software, because it doesn't run here (and wouldn't be useful to me if it did.) All books are transfered via SD card, so I switch cards out on a pretty regular basis.