I loved my K1. I have used it so much and ebooks have become such a large part of how I spend my free time that I pretty much decided even a small improvement was worth investing in.
I used that to justify snagging an iPad, that and my insatiable gadget lust. There are huge differences between a K1 and an iPad. The weight surprised me, I didn't expect it to make a difference, but it made me change how I held the device so try and prop it up on my body more while I read. I eventually got used to that and the touch screen interface.
I got to a point where I decided I liked the iPad better than the K1, mostly because of the interface. Tapping to turn pages seems natural, and finding a particular book in a scrollable list rather than page after page of books on the K1 also seemed much faster and more natural. The text on the K1 looked better to me though, the iPad's resolution is just not high enough and the text is surprisingly ugly to me and kinda blocky. I got over that though and the iPad became my preferred reading device.
I recently got the Kindle DX graphite. At first I disliked it because the buttons were uncomfortable and I kept pressing the home button by accident when holding the device in my left hand (upside down). I was determined to give it a fair shake though so I stuck with it. It is rapidly becoming my favorite device to read with now. The text is dark and sharp and crystal clear. I really like that quite a bit. The collections feature works kinda like folders and makes having lots of books on the device less of a hassle. That feature is on K2 as well but I never made that upgrade.
The thing that really nailed it down for me that the KDXg is the current winner for me was my physical reaction to it. I had been having allergy like symptoms with itchy dry eyes and mild headaches. I assumed it was too much pollen in the air. It also made me feel tired much earlier than normal which was really messing with my sleep schedule. I stopped reading on the the backlit iPad and started up on the KDXg...all those symptoms went away. My headaches disapeared, my dry scratchy eyes felt better...I slept better too.
That was the reason I originally got a K1 in the first place...I had those symptoms from reading off an LCD screen. It had just been so long I didn't associate them with reading anymore. To be fair though, when a free weekend shows up I can easily read 14hrs straight when burning through a series. The iPad problems tended to show up after 10hrs of straight reading so it might not be a consideration for most people. I figure it was all eye strain related.
I also tried the iPhone 4's iBook app. I was very surprised by how sharp the text was, I am not convinced it would cause the same eye strain issues given how good the text looked. I didn't really test it much though because the screen was too small (though it would do in an airport). I did wonder how awesome it would be to have that quality a display on an iPad though.
That is it for now. I am curious to see when the K3 comes out, a 6" screen using the enhanced KDXg screen technology would be awesome and I suspect the 'ultimate' device for my use. It would be even better if they supported epubs and normal folders rather than collections.