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E Ink readers will always be less popular than portable audio players, which are predisposed for passive consumption. But I suspect that once the Sony Reader is physically visible to the casual public, its sales will take critics by surprise. One pattern I've noticed is that nearly everyone who actually saw the PRS-500 at CES very excited by it. Do a search on CES coverage of the device and note how different it is from subsequent commentary by people who haven't seen it. By the time I actually saw the Librie, the Reader was already announced, and the new product's imminent release is the only thing that's kept me from shelling out $400 for a Librie from Japan Direct.
I think the killer app of these devices is substitution of printers, not books. Most of my non-working time at the computer consists of reading online content that I would much rather reader offline, often printing it out to avoid gazing directly into a light source for long intervals. With enough file formats supported, even if through conversion, I could not only get rid of my home printer but "print" documents from my laptop that want to read offline when I'm nowhere near a printer.
Without some technology like E Ink, the thought of reading entire books on any light emitting display is completely unpalatable to me, no matter what additional convergence of features is offered by alternative devices.
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