I was waiting to see the Nook before I decided what to buy, but I got tired of waiting and ordered a Kindle.
I love the Kindle. A lot of public domain books are free through the Kindle store. And, I think there are other places to find them, but I haven't been very thorough in seeking them out yet.
You might try the mobileread.com website for more info on different readers and formats.
(One of my friends loves the Sony e-reader because of the wider choices of formats, so if you're primarly interested in free books, you should take a closer look at that one.)