Imagine reading a book in the bath and then dropping it – you can still read a paper one when it's a bit wet, but will the kindle still work when wet? Can the display cope with the humidity? A kindle might store hundreds of books, but if I drop a paper book in the bath, it's just the one which is crinkly. Not my entire collection which gets wiped out along with the expensive reader.
I find myself using the internet almost always for any kind of reference now. I'm not one for buying books costing hundreds of pounds when I can get these things online for free. (Wikipedia, Medline, php5 Manual, etc)
I can pass a paper book on easily. They don't cost much and if it doesn't return to me I don't really care. The book can be passed on and on and on and each time the reader doesn't have to spend a fortune on a reader.
The best books are large with loads of colour photos. I don't think the kindle can cope with that. I can't stand online magazine publications with their slow response times, awkward interfaces and screens which are too small for them. The screen is 90dpi and A4 landscape, while print is 300dpi and A4 portrait. With online sites, we don't download them because we scan the headlines and read the bits that are interesting – it's the online equivalent of flicking through the boring pages.
Why should we buy a Kindle when we can get a netbook? The prices sound similar and a netbook can do more. If they want to replace the paperback book we need something that is better than a notebook.
What we need is a revolution in display technology – OLED only cheaper! Something that can fold up into a small space, is touch sensitive and has a high resolution. It's going to take time. Kindle is a step in the right direction, but with SSD, memory sticks and low power CPUs like ARM the netbooks are going to slim down and be cheaper and better than kindle anyway - but I still wouldn't want to take a netbook into the bath with me.
You'll probably find that the best answer will be something entirely different. Perhaps one of the mobile phones with the built in projectors. Place the phone on the floor or on a chair or special stand etc. Project the book onto a white ceiling, lie back in the bath and use the built-in hands free voice activation stuff to "turn the page"
Kindle stores more than paper, internet stores more than Kindle, paper is more convenient than the internet.