Either way, I hope that phones do not become the preferred way to read books, I really like my e-reader, if only the technology seemed a little more modern (Its hardly changed in 5+ years) I think they would have no problem becoming more popular.
ebooks are easier to store, easier to back up, and easier to access where and when you want than paper books, and can support functions (search, etc.) that paper books don't. There's a good case that -- outside of the downsides of DRM for those books that are burden by it -- ebooks are just plain better than paper books in many ways. So its not really unreasonable that they'd be more expensive (books generally don't have direct substitutes, and the ebook and physical version of the same book don't come from competing entities, so the tendency for a perfectly competitive market to drive prices down to production costs is mitigated -- OTOH, the forces driving prices up to marginal utility are present just fine.)
I love my Kindle 3G Keyboard and I really hope e-readers stay around too. But I've noticed I've been using my Galaxy Tablet a lot more for reading lately, even with its lousy 160ppi resolution.