I have the original Kindle and love it. I got it (asked for it as a gift) with the hope that if I had one I'd force myself to read more, but that didn't really pan out. But it's great: The "Whispernet" functionality is awesome... If you want a book and are anywhere Sprint has EVDO service you can download it in about 60 seconds. The screen is very clear in any light (it's not much different than a book) and the refresh rate between pages is fast enough (it's better on the 2nd gen) that after a few page-turns, you don't even notice it anymore. Also, I have the NYTimes and a few blogs delivered; leave the radio on and they're there before you wake up. And you can put a TON of books on it. All in all, to me, it's as enjoyable and comfortable as reading a book but with a bunch of added benefits.
The negatives? It takes a little getting used to in order to hold it without accidentally pushing a button to turn the page, but they did improve that in version 2. Also things like notes in the margins (Stephen Colbert's book uses that
a lot) don't really translate well. Also reading newspaper articles is... different. Not
bad, I guess, but it's not the same as reading the paper.
I also have the Kindle reader app for my iPod Touch; I've found that it's sufficient for shorter reading spells (my 30-35 minute commute is about long enough) but the smaller screen doesn't compare to the Kindle's. But what's really nice is that it keeps track of where you're at in a book and sync's it across all your devices... If I read 5 pages in a book on the iPod, the next time I pick up the Kindle, it'll pick up in the same spot. Pretty slick.
My boss has a 2nd generation Kindle and I had the chance to play around with it a bit. It's much, much thinner. I could be wrong but it "felt" a little heavier and generally I didn't find it any more comfortable to hold than the first generation. Also they changed the navigation device; it's now more of a eraser-head type deal instead of the scroll-wheel on Gen 1. It's not bad, but I don't think there was anything wrong with the scroll-wheel.
Overall, if you read a lot, I say find somebody who has one and see if you can borrow it for a bit to give it a try. I kinda get the feeling that people either can transition to it pretty much seamlessly and immediately like I did or just won't ever be as comfortable with it as they are with a book. If you use it for 20 or 30 minutes and haven't gotten used to/happy with it, you probably won't ever. YMMV, but I highly recommend giving it a shot!