I'm sure you've read Seth Grodin's blog post about how Amazon should compete in the ereader market. It's an interesting post, but he is wrong on several every point.
He wasts Amazon to make a $49 Kindle. That's just not possible. A Kindle is defined by 3 things: keyboard, Wireless connection, and battery life. You'd need to drop all3 in order to make a $49 Kindle. That wouldn't be a Kindle anymore. At best it would be a poor knockoff of the iPod Touch.
If there were a $49 Kindle, I would tell people to get the iTouch (and I don't like Apple).
Buy 8 ($10) books, get a free Kindle
This one bothers me the most becuase it's obvious he didn't do the math. Under the Agency model, Amazon would get $24 from the $80 earned on those books. If Amaozn gave away a $49 Kindle, they would lose $25. Why would they do that? They're not stupid.
Kindle of the month club
This one has merit. At least, it would if not for the fact that Amazon is already taking the opposite approach. Do you know how they pick the titles for their publishing imprints? Crowd sourcing. They look at what people are already talking about, and then try to sell them more of the same. Amazon don't tell people what to buy; they sell what people want. Heck, if anyone really wanted to do this they could work off the Kindle Store's bestseller list.
Greater distribution control for publishers/creators
This would be nice, yes. Amazon are too heavily focused on the consumer market; they've ignored the specialized controls that would be useful to various niches (education, indutsrial, etc).