If they come out with a useable ebook reader, I'll buy it. "1,000 books in your pocket" has a nice ring to it.
The problem with Audiobooks on the iPod is that there's no way to fast forward/reverse through the recording (as you may already know).
So if you're listening to an audiobook, stop midway and listen to some music, then go back to the audiobook, you've gotta start from the beginning.
Audiobooks work much better on iTunes.