1) You can lend your Kindle out all you want and let people read your books, just as you could before. You just can't duplicate the book onto someone else's Kindle or in any other way, just as you couldn't before. This is a reasonable restriction and not any worse than it was with a physical book, which you are also prohibited from scanning, photocopying and distributing outside of fair use.
2) You can not copy/paste a physical book either. I agree that this should be allowed, but it's not a dystopian future - there is no loss over physical books here, only gain.
Perhaps Amazon should allow some sort of way to help with "fair use" citations, and maybe they should remove restrictions on public domain material. On the latter though, those are generally available for free from many sources, so the fact that you can't copy/paste on your Kindle is an inconvenience, not a dystopia.