Short answer: Kindle 3 and Nook Touch are very close and provide the best reading experience for the money. Longer answer...
Kindle 3:
Pros:
+ E Ink display is great for long-run reading -- like reading from a book.
+ E Ink Pearl display provides 50% better contrast than E Ink Vizplex found in regular Nook.
+ 4G internal memory
Cons:
- web browsing, apps, and games are much worse than with a Nook Color.
- no SD expansion
Nook Touch: Same pros and cons as Kindle, plus:
Pros:
+ touch screen
+ EPUB/library support now; Kindles updated later this year
+ SD expansion
Cons:
- no 3G
- 2G internal memory
Kobo Touch: Same pros and cons as Nook Touch, plus:
Pros:
+ international bookstore
Cons:
- only 1G internal memory
- Partnership with out-of-business Borders
Sony Readers: Same pros and cons as Nook Touch, plus:
Pros:
+ better PDF support
Cons:
- expensive
- no wireless except on most expensive model (PRS-950)
- largest screen 7" (compared to 9.7" on Kindle DX)
Nook Color:
Pros:
+ better web browsing, apps, and games
Cons:
- long-run reading experience is poor compared to E Ink readers -- like reading from a computer monitor
iPad:
Pros:
+ best browsing, apps, and games
+ best PDF viewing
Cons:
- expensive
- heavy
- long-run reading experience is poor compared to E Ink readers -- like reading from a computer monitor
Nook First Edition:
Pros: None, unless you catch a great close-out sale or like the gimmicky mini color LCD panel used to show book covers
Cons:
- E Ink Vizplex display is older technology than E Ink Pearl found on Kindle 3s
- Web browsing, apps, and games are worse than Nook Color and Kindle 3