You just made a perfect representation of what I think Apple should do for a combination e-book reader/iPhone.
Of course, I'd make it just a tad thicker to accommodate a bigger battery and a 120 or 160 GB hard drive, and the device will include built-in Bluetooth for a wireless headset, Wi-Fi (and maybe WiMax), and HSDPA support.
Remember those old Windows CE ultraportable machines? That is what this combo e-book reader/iPhone will be sized.
Why not just make it a tab bigger and call it a Mac Tablet. Once we get a 9" to 11" screen on the thing it's basically an Ultra Portable Mac.