I spent a lot of time researching ereaders, and the good news is that by now, most of the bugs and kinks are worked out, so you will most likely be happy with any ereader from the bigger, more established brands (Kindle, Nook, Sony, etc).

But I ruled out the Kindle because it uses a unique, DRM-format, and doesn't support epub. Yeah, there are supposedly file conversion programs out there that will convert all kinds of formats to Amazon's format, but I have no idea how well any of them work. It is very nice to be able to get ebooks from a variety of places (and no, I don't mean torrents). I can buy from Sony and Borders/Kobo and Google, download free books from Project Gutenberg, borrow books from my online library, and I've even grabbed a few short stories from Tor.com.

I'm still relatively new to the ereader/ebook thing, but I'd probably recommend against a Kindle. I got a Sony Reader PRS 650, which has a touch screen. It's smaller than most other ereaders, but with the same size screen. It is very easy to navigate: I can tap words directly to look up definitions, I can highlight, type, and even write notes with ease. It is more expensive; I don't know if I'd pay full price, fortunately I got some sales and deals with mine. Price-wise, you might want to go with the Nook.

If you have any questions about features or anything, I'd be glad to help. I've been very pleased with my ereader.