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No, text input isn't essential, just nice to have. I use my eBookwise every day, and I don't use text search once a month. Obviously I select books from the library listing with the touch screen, but other devices do that with arrows, and I could as well. For a low cost, I could live without the touch screen.
My ideal reader would have an OLPC screen, 300 dpi in mono mode, 4.5 by 6.0 inches. Down the left side I'd have two big buttons, the page-forward/page-back of the eBookwise. Along the top I'd have two similar buttons, for reading in landscape mode. Down the right bezel I'd have 15 or so small alpha keys, with 'AB;' and 'CD:' and so on, mostly two letters and a punctuation mark, so you could text in most anything needed. The bottom has number buttons: '1![' and '2@]' and so on.
Each corner has a button. Perhaps a rotate/zoom button, another a menu popup, the third a library button, etc. Most things can be done from menus using the big page buttons as cursors. Inputting text is a bit slow, but workable. The frame is rubberized for a good grip, the battery is a user-replaceable cellphone type, storage slot is likely SD.
Color mode is a nice extra. The base hardware shouldn't be incredibly expensive (not $50, but the OLPC's estimating $140 for its unit, with full keyboard and more, distrubution and training and stuff not included). It should be able to read all the usual formats. Late 2008, maybe.
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