I got a K1 in 4/08 and upgraded to the K2 upon announcement, giving my K1 to my daughter. It broke last week and when she called, she was told that she could send it in and get repair for $99. Since it was on my account, she had to call back with my account info. When she did she was told they were out of K1s and would contact me later. Well the next morning I got an email saying that they were going to upgrade the replacement andn could I call CS. When I did, they confirmed the upgrade of the K1 to a K2, plus they weren't going to charge the $99.
I am happy to report that my daughter is now the proud owner of a new (if it was a refurb, I couldn't tell) K2 and has already filled it up with books.