If you would like a small, affordable handheld e-reader that isn't a Kindle or iPad -- and you have plenty of initiative -- let me introduce you to the Microtouch.
The Microtouch itself is actually a fun example of open source hardware. This small, low-power 8-bit mobile device can be built by anyone with some electronics experience. The OS is, of course, also open source. Plans and parts list are open source, or you can buy the board pre-assembled.
A developer named Rossum, one of the creators behind the Microtouch, has recently released an open source e-reader for the device. The software converts e-books from the epub format into a format that can be read on the Microtouch. (Many other small open source apps are also available for the device.) Sure, the 320x240 pixel screen is small but for the true DIY'er and open source enthusiast, the Microtouch can be both fun and useful.