As I type this out on my iPhone, I have to say: the Kindle must win on both usability and content to soar. But, Amazon's strength is so heavily weighted to content, that is the place they should focus.
Enter Pronetos. Pronetos looks to be the iTunes of the academic coursepack. And if the iPod and Facebook/MySpace have proved anything, they have proved that kids alone can make a platform succeed if it has the content and/or connectivity they crave. They will even buy a second device if necessary.
Amazon: get academic publications on the Kindle now. Add the smart pen (ie, social networking) and the sky's the limit.
I'll integrate it all with my iPhone later ;)