I don't think the question should be will the iPad replace eBook Readers - it should be: Will the iPad force eBook devices to evolve in order to compete? The answer would be yes (proof can be seen in the newer eInk devices with combined screens and also the lower prices)!
iPad changes the whole game. In two days time we added thousands upon thousands of possible new ebook readers to the market (users). The device supports more DRM formats than anything other than a netbook and is a bit more portable. You can read comics, listen to music, surf the web, and watch movies. Now remember the introductory price of the very first Kindle model. People were willing to spend $400 or more for that thing and all it did was offer reading content! Although we had other readers on the market (Sony for example) it revolutionized things because the Kindle Store itself - not because it was the best device. Much like the iPod revolutionized how many of us buy music. The iPad takes portable entertainment a step further, in what many users will say is just about the right size (that is debatable). Kindle made it easy to buy books and read them. iPad makes it easy to buy books, read comics, watch movies, and listen to music.
Is it the perfect device? NO. I would do many things different, and we have talked them all to death on this forum I think. On the other hand, it will be a huge success and all of us will benefit greatly from that. Those of us who want iPads will love them for what it brings to the table. Those of us who don't want one will benefit by the eBook market opening up in a big way and offering more titles and competive pricing on devices from other companies that offer the same or better features.
It is a win-win for all us of and even if we hate Apple and the iPad all we do is benefit from its popularity. This will be a great year for those of us that are MobileRead-ers.
Note: The whole eye strain thing in favor of eInk readers is debatable at best. There are many studies on both sides that claim one thing or another, but the bottom line is that most of us use LCD devices every day, and are likely using one right now. The arguable benefit of eInk is the battery life. That is an undeniable fact. Eye strain? Just a marketing ploy if you ask me. I've been using computers most of my 43 years on this planet and my eyes are as good as the first day I could remember using them.