CAN? Yes. WILL IT? Probably no in most cases. The iPad could have been a huge competitor against many readers had it been priced around $300-$350 USD with adequate accessories included. But at a starting price of $500 USD without many accessories included I seriously doubt you will see many eBook folks switching from their $150-$250 USD readers. It is just too expensive, especially for what you get. I think it will sell well, but not so well among folks wanting to use it primarily as a reader.

Apple does glitz and marketing better than almost all other companies combined. But Apple really doesn't do cutting edge technology as well as many perceive. I bought the iPod touch thinking it could do a lot more than it does. And it is a good little device. But after a short period of time I realized how limited it was and then I realized how little I actual used it. If you are into music and games, it is fine. If your into to eBooks and spreadsheets and transfering files to and from a PC, it is very limited. (Actually it does eBooks pretty well, but the battery won't last more than three hours and loading eBooks is too kluge.) And the fact that there is too much "big brother Apple" control over how you use it really hampers it. (I'm using Apple's own "big brother" Orwellian reference they used against IBM in the 1980's and turning it against Apple because Apple became more of a "big brother" control freak than IBM and Microsoft combined!)

So back to your question--Will the iPad replace dedicated eBook readers? It might replace some higher end models currently available, but it won't be able to replace the lower end models because there is too big of a price difference. I also think that the newer technologies being released this year will make the iPad even less of a viable eBook reading option. I also think the release of lots of Windows 7 tablets this year will make the iPad seem rather like the failed Palm Folio of a few years ago and will relegate it to the gamers and toy players more than to the serious computer users and more sophisticated folks who read actual books rather than just comic books.