Funny, I was in the exact same situation as you over the weekend. I've been wanting an e-reader for a few months now since my GF got a Nook. The e-ink was so much more impressive than I imagined once I saw it in person. And the fact that she can read a 2.5-inch thick biography comfortably with one hand (to hold it and flip pages) was really neat too.
But before I got one, I went to Best Buy on Sat to play with an iPad. And I admit it impressed the hell out of me, but I really don't like the idea of reading full books on a backlit LCD, especially not after seeing that glorious e-ink. I've tried it on my iPhone, I've tried it on my MBP... and it just makes your eyes bleed after a few minutes of staring, especially after working on a PC all day. I had other reasons, which I posted in the iPad thread
here if you're interested.
So I left BB, went down the street to Barnes and Noble and got a Nook. I did some heavy research earlier and ultimately I chose the Nook over Kindle for a number of reasons. Form factor was one. Nook is small and compact, very simple/sleek design. I really don't like that 1/3 of the Kindle's real estate is taken up by a keyboard. Instead the Nook has a small touch screen at the bottom, which is used to navigate menus, type with a keyboard, and as a "coverflow" effect to flick through your library. It's a smaller device, but the screen is the same size... it's a more efficient use of space.
Another neat feature is if you take your Nook into any Barnes and Noble store, you'll have full access to their entire ebook library for free while you're connected. So it's like walking into the store, pulling a book off a shelf and reading it for a few hours and putting it back before you leave. Also, connecting to the store gets you promotions like coupons and free deals (separate from the ones you see when you're connected at home). Nook uses Android OS too, and has a good degree of options, some we can talk about on these forums, and some we can't
There's also the lending feature that allows you lend a book for 14 days to another Nook owner... but that feature has been severely gimped since it came out. Once you lend a book you can never lend it to anyone again, while you have a book lent out you can't access it, and only select books have lending available. Still, the idea with the Nook is that it's not just a digital ereader, but it's like the full book reading, shopping, lending experience... nearly anything you can do with a physical book in your hands, you can do with an ebook in a Nook.
Sorry for prattling on for so long, but I saw that you're literally me, only 3 days ago. So I had to jump in with my full experience. Just to note, Sony also has an ereader that might work for you too... similar in size to Nook and it has full-touch screen models. I played with one in a Sony store and the touch screen was slick, but for me it was more than I needed or wanted to pay for.
Good luck!