The Kindle 3 was like the girl next-door: Maybe not the prettiest, but comfortable, smart, and simple. The new non-touch Kindle's the bitchy cheerleader; absolutely gorgeous but totally unaccommodating and uninterested in whether you're enjoying yourself.
For the first time, picking up a Kindle doesn't feel like I'm firing up the ol' Book Reading Machine. The waif-thin proportions and low-profile design make it feel like a natural successor to the paperback—more like a Book Reading Accessory. And from the new size comes the biggest improvement to functionality: The reader now fits comfortably in your jacket/back pants pocket. Sure, it sort of did before, but it looked pretty stupid. I'm going to take this thing out with me when I don't have a bag a lot more.
Page turning is faster than the Kindle 3 (though not so fast as the Nook Simple Touch), and I actually enjoyed the new, non-dead-author wallpapers more than I probably should have. I haven't used the Special Offers version, though, so I can't tell you how much those suckers detract from the experience. (Probably not much though, since they're just screensavers.)
The easy, ergonomic simplicity of the Kindle 3 is kind of gone, the page-turning buttons being the biggest offenders. On the previous models, they were flush on the front of the device. But on the new model, in the service of clean lines and industrial design, they're strangely narrow and on the diagonal edge of the Kindle. That makes holding the device incredibly awkward, and you're more likely to get a hand cramp than find a position that lets you hold the Kindle and press the page buttons comfortably.
Inputting text is a lot harder without a keyboard, and you can see how that would be a giant pain in the tookus for anyone who types on their Kindle with any regularity (I don't). Much more troubling, though, were the newly-centered navigation, select, menu, and back buttons. The right-aligned keys on Kindle 3 allowed for easier navigation that, accidentally or otherwise, made for a wonderfully ergonomic right-handed reading experience. Using the nav buttons for the auto-dictionary function (to figure out stuff like what "nightsoil" is in King's Landing) is an almost-every-few-pages action, so it's a pretty large inconvenience to have to reach to the middle of the device each time. And the out-of-the-way buttons are compounded by information like page count and location values now requiring you to press the menu button to be viewed.
Maybe, if you want an ereader for under or around a hundred bucks. But there are a bunch of caveats. The size difference makes it really hard to justify going back to the Kindle 3, because the size difference breaks the barrier for true portability and pocketability. But it's more of a pain to use than a Kindle has any right to be. If all you care about is ease of use, you might want to take a look at the Kindle 3, Nook Touch, or wait a bit and check out the Kindle Touch in November.