Many people (including the above mentioned, but more, too) recognize that the kindle and similar e-ink readers are most useful to people who are reading longish text-heavy things, and want to be able to carry more than one of them around at a time. In fact, if there's a subtle but pervasive thread, it's that e-ink readers are ideally suited to carrying around several books to read at a time, and the books can't have much besides text in them. Me, I took this (accurate) observation and decided that the "natural" market for the kindle (and like e-readers) are people who read a lot (2+ a week) -- they might have more than one in flight at a time, and they are frequently in a situation where they need to bring two or more books with them, because they'll probably finish one before they return to their Big Hoard of Books. Oddly, many other people don't know _anyone_ like this (more likely, don't realize they know anyone like this), and conclude that there is no market for the kindle. Some people know someone like this (might be that person), but believe that there are not enough of these people to constitute a mass market for the reader thus bringing the price down.
Really, tho, the price never had to come down to justify it for the person who is sick to death of carrying around three or more books at a time to make sure they don't run out of reading material. Not too many people seem to be noticing that. Even weirder, however, is the idea that one product or a small product category must sell many to bring the price of that product or that small product category down.
To which I would like to wave both hands, jump up and down and otherwise get the attention of the person leading this discussion so I can point to the netbook that everyone thinks ought to be a perfectly acceptable ereader and isn't. Because the netbook didn't get cheap by having a huge market and then getting cheap. The netbook got cheap because all the parts were widely available and cheap as a result of _other somewhat unrelated_ products. And then someone put them all together.
And that's all ignoring the fact that neither the "natural" market nor the people selling ereaders really gives much of a damn whether this thing becomes what ars technica folks would consider a mass market device. The "natural" market is a tiny number of people who read a godawful number of books. Moving them to a pipeline model helps everyone. Well, except that it doesn't, because it simultaneously makes it very, very tenuous to sell books to anyone other than them.
But honestly. Who gives a crap about that? Those people can all continue doing whatever they were doing before when they weren't reading. Beer. Video games. Sex. You know. Fun stuff that the cool kiddies do.
ETA: Okay, or reading on an emissive screen -- their phone or whatever.