Can you blame them? The hardware is dead and HP have even been firing whole swathes of the webOS team. There's little reason to develop a free app for the TouchPad anymore.
If you want library ebooks on then you have 2 choices. You can either use the Kindle app or wait for a hacked Android firmware (there are Overdrive and Kindle apps for Android). Now, I don't know that this will be terribly useful to touchPad owners, but I for one like to keep my options open.
I'm also trying to find more reading options for the TouchPad; it doesn't have very many options (only 3 free apps so far). In fact, I'd say that it is a pretty poor ereader when compared to almost any other tablet on the market.
Of course, the nice thing about the TouchPad is that you should be able to use the web browser to checkout the ebook and send it to the Kindle app, and then open the Kindle app to read it. And you can do it all from the TouchPad (the same applies to other tablets and the iPad).The process isn't as simple as it could be, but hey, it's free library ebooks.
If you need help with this, check out Amazon's help pages. The process seemed relatively straightforward.
P.S Brad, thanks for reminding me to double check this.