That device looks like a brain dead Palm pilot - and considering how brain dead they already are... :-)
If I was going to be able to read a book on an electronic device, then the text has to be legible. Not 106dpi, (as the above device is) but 200dpi at the very least. Microsofts 'innovation' Cleartype increases horizontal resolution by a factor of 3, but only on colour screens and only in certain conditions (black on white, or white on black, or greys), but the text does look better. I would prefer a 2x increase in resolution in both directions, but still in monochrome or 4 colours (basic smoothed fonts), and it would still take up less memory than the low-res colour display of the same physical dimensions. Of course, how many 1024x768 200dpi greyscale LCD displays do you see?
Also, the background has to be reflective, like paper. A backlight will hurt the eyes in the end. The background has to be nearly white, although a bit of yellow has never done a book any harm. Crisp fonts are the order of the day, and as rusty says, no scrolling! The screen should be the size of a paperback, and the device should be thinner. The touch screen abilities were a good idea on the other device, and the margin notes feature.
As for distributing books... I am sure that virtually any media would allow it. Soon you could walk into your local bookstore and see book boxes - paperback sized boxes that contain the tiny Secure Digital Memory Card (Panasonic et al. open spec) or Memory Stick (Sony, proprietary) which you plug into your e-book and download the book. The book distributors are not going to want their book copied, and they will have learnt from MP3 that it is not a good idea to use a non-secure format for ebook distribution.
How large is an e-book? Assuming 500 pages, at 50 lines per page and 50 characters per line, and lots of formatting tags and the like, and maybe some pictures and maps and the like... not more than 4 to 8 Mb. You can't get the aforementioned devices in less than 16 Mb sizes, and the cost of them has to come down enough to be sold as books (maybe ROMs in SD or Stick format would be a better idea). Of course, on-line distribution will be a lot cheaper and easier, but if you delete the book, then you won't have it anymore.
Enough Rambling... :-)
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