Amazon has reduced the price of the Kindle to $259. If Apple can produce a full-color reader and media device that doesn't cause eyestrain and is priced in competitive range with the Kindle, allowing for a larger screen and color, it may kill the Kindle. The question for readers will be can Apple provide as much content as Amazon.
If I had to guess, the tablet would be at least double the price of the kindle. An iPod touch costs the same as a kindle, theres no way a more full featured 10 whatever inch display tablet is going to cost $259.
Amazon makes its money on the sales of the books and I will bet Apple can gather enough support to have a good amount of distributed digital media behind this device, just look at what iTunes already has available.
Oh and how many rumors are we going to get about screen size and print media before we start hearing the parts that are actually interesting...