I just came across a new posting on the Zune Boards. Several hackers have successfully hsut down the GUI running on a Zune HD and given us access to the underlying Windows CE OS.
The Zune HD has a 3.3" screen, Wifi, and HD Radio. I don't know the rest of the specs, but it is a PMP so I'd assume it has great video and audio abilities.
They've already tested a number of WinCE apps including Opera, Foxit, Pocket Word, and TCPMP (more details here). There's no mention of Mobipocket or other reading apps, though. But since it's running Opera, Ibis Reader is a possibility