That electronic ink is what makes e-books revolutionary. If the new Apple device has a glossy screen, that will make the eyestrain issue even more apparent. Kindles are incredible.
Now, if you're talking about graphic novels, or comic books, that's a market Apple could exploit. But it's niche.
Full-color Kindle-esque "electronic ink" displays are on the way.
And, what is the big deal with the tablet??? It seems like a terrible idea -- why would they need such a product? You've got Macbooks, you've got the iPhone, and the iPod -- is there really a space in the middle that people are just dying to have filled (obscene jokes go here)? Imagine if something had a similar design and form-factor to the iPhone, but had an 8 or 10 inch screen. Do you know how prone to scratching and breaking that thing would be? And where would you carry it? In your backpack, where you carry your laptop anyway?
I think the iPhone as it is has just about the perfect dimensions, and Apple should focus their attention on making THAT device as good as possible, rather than trying to introduce a netbook or tablet. Maybe a true widescreen iPhone would be good, but otherwise I think an "in-between" product is pretty stupid.