Yes, the screen is kind of small, but overall I've found reading manuscripts via the Stanza app and Stanza desktop to be no worse than reading manuscripts on a Kindle.
The Stanza desktop program works with more file formats than I could wirelessly send to my Kindle, though not with docx. One ms sent in that format I had to open in Pages, convert to .doc instead of .docx, and it did then go over to my Touch but as one long paragraph. So far I've been able to keep track of it all, but paragraph breaks to have a certain virtue.
The battery life is better than I'd thought. In part because my hotel room has free wired internet but not free wireless I've mostly just been using the Touch to read on, and setting it at the lowest comfortable screen brightness, and I can probably read an entire decent-size ms on one battery charge. The Kindle battery lasted longer in theory, but the circuity for when I turned on the wireless each morning to take my newspapers tended to eat up way more battery than you'd expect, and the Kindle said its battery likes to be charged often instead of drain-and-charge, so I can settle with the battery life on the touch. Reading on Stanza or not, if I were using the wireless more or blasting music more at loud volumes the battery will go. As I slowly burn more of my CDs, buy music on iTunes, maybe I'll find the battery issues more annoying. But so far, so good.
Lots of font size options on the Touch, just like the Kindle.
The Touch has a smaller screen so I have to turn the pages more, but the pages refresh in the blink of an eye which the Kindle's do not. So I'm not losing the fractions of a second I've been used to using on the Kindle with each page turn. I think that ends up being a draw.
Note-taking on the Touch is fine. Press bottom button, hit the note pad button, start taking a note. You can't see the manuscript, but the note screen on the Kindle covered up half the page so I couldn't really see the manuscript there either. Theoretically I like a physical keypad more than the touchscreen, but as I'm getting used to the keypad on the Touch, getting used to its auto-suggest, and sometimes taking advantage of the landscape mode in the 3.0 iPhone/Touch upgrade that makes the keys bigger, I'm finding the overall typing experience to be better on the Touch. Fewer mistakes, those I make are more easily corrected, typing symbols is easier.
The Kindle did auto-insert a location # which could be used to help an author find where I was taking a note but in an imperfect kind of way. The Kindle also inserted lots of extraneous stuff like the date and time each note was taken that I'd have to strip out before sending the comments on to my client. Stanza tells you you are 37.45% thru the manuscript so I can add that easily enough and it's about as helpful as the Kindle location. I haven't yet e-mailed my Touch notes to my home base to pass on to an author, so this story isn't complete.
The Kindle with its black on gray E-ink seemed to thrive on bright daylight. The lighter it was the easier the Kindle was to read, and then the darker it got the harder it was until you couldn't read at all. The Touch has backlighting, and it's a little less fine in the brightest daylight and you need to up the brightness, but it was wonderful reading on the Touch walking down MD Rt. 355 from White Flint Mall to the Grosvenor Metro Station at night and being able to read the whole time when I wouldn't have been able to read on the Kindle or even on a magazine with very bright glossy white paper for contrast. Advantage, Touch.
I was able to read the Touch while using the elliptical at the gym, just like a Kindle, though the added page turns from the smaller screen size meant a slightly less vigorous workout for the arms.
But basically, for reading manuscripts I'd say I'm delighted with the Touch even though I'd never purchased it with that in mind, and the Kindle can go light itself a nice campfire.
The Kindle did have rudimentary internet on a wireless network, so in that regard somewhat better than the Touch.
The Kindle did offer wireless newspaper delivery, and I need to see how the Newspaper Direct version of the Washington Post goes. But let me say that I never enjoyed reading newspapers on the Kindle. I liked having a Washington Post wherever I wanted it to be, but the actual reading experience was not very good. The Touch would be even worse for actually reading a newspaper.
I think if I could buy a used Kindle at a cheap enough price I might well do so, but I'm pretty firmed up now that I ain't paying $180 for a refurbished or $300 for a new Kindle 2. So Jeff Bezos and Amazon will lose hundreds of dollars a year in subscription income from me. I don't love multi-function gadgets that print/fax/copy but I kind of like the way that the Touch plays music really well, gives me a better Address Book than my cell phone, surfs the internet decently enough for the screen size, plays video really well for the screen size, and on top of that I find I'm able to read manuscripts on it just about as well as I was doing on the Kindle.
Update #1: The docx manuscript that came on to Stanza as one long paragraph ultimately got to be too big for Stanza to handle well. It likes to divide things at part or chapter breaks into little bite-size chunks. Once I got past the halfway mark into the ms without any of these breaks in the file, I had to finagle a bit to get it past each page turn. So I saved the second half into a separate file, and I assume what will now work without difficulty.