The best thing about the Kindle Fire is that it's probably going to start a full fledged tablet price war. Expect to see Android tablets for quite a bit cheaper in the future (I'd guess). Thing that would worry me about it is that it's running Amazon's own version of Android. Heavily modified user interface (not unlike what samsung, HTC, whoever else does) but also some out of the box software limitations. It only has the Amazon App Store, which usually means it doesn't have any other google apps on it (don't think you can just download them either as they're probably only in the Market). Not a huge deal, but something to think about. And XDA or someone will obviously have a way around this in weeks and have Honeycomb running on that bitch.
As for e-reading, I don't think it'll be any better than any other tablet. Shorter battery life (8 hours from what I've heard) and non e-ink screen. A lot of people like reading on tablets, and it'll be great for them, but it's not going to bring any of the e-reader die-hards over.