Hi Steve,
I started reading on a succession of PDA's (all iPaqs) about seven years ago and went to my HTC Touch Diamond about 18 months ago and I don't have any problem reading on the small screen. Reading is a very personal experience and people's preferences for smaller or larger screens are many and varied. The good news though is that there are multi- function devices and dedicated readers in every shape and size these days so everyone can find a device that suits their needs.
Even if you only intend to use a device for reading I still strongly recommend multi-function devices like smartphones and MIDs (Mobile Internet Devices) over dedicated readers because multi-function devices give you more choice of where you get your eBooks from. With a multi-function device, when there is an update for the reader app it is a lot simpler to update then it is to install a frimware upgrade on a dedicated device and also a lot less likey that you'll turn it into a brick.
For me a smartphone is an excellent reader because I always have it with me, I can download eBooks directly from the net, as well as check email etc etc. Also, small devices are a lot easier to hold aloft for extended periods when reading in bed (unless you're Popeye that is).
Other means of getting eBooks into your Mobile are via Bluetooth or Wifi from someone else's mobile or laptop, direct cable connection to your laptop or using the removeable memory card.
Whether or not you want to store your eBooks in your main memory or not depends on how much memory you have to play with. As a general rule though I find it best to install apps to the main memory and use your memory card to store the eBooks themselves as this seems to give the best overall performance.
You can read pretty much any format eBook on your HTC. Out of the box it can read html using one of the included browsers, txt, rtf and doc with Word or Word Viewer both of which seem to come on all Win Mobile based handsets. For the proprietary formats like mobi you can download the assocoated app (as you already have) and there are apps for reading other proprietary formats, you just need to google them.
For ePub on Win Mobile and Win CE there is only ZuluReader and Freda that I know of.
I uploaded an update to ZuluReader for Win Mobile and Win CE to the site yesterday. That update fully supports the WVGA (480x800) format in both portrait and landscape modes. Make sure you try the new version before you finalise your review
Links to the ZuluReader download pages are in bold in my signature.
Cheers,
Steve.