>Yes, the difference is between Joe User who just wants to read the news in his RSS reader rather than in a browser window, and Jane Website who takes the content and republishes it to her own users with her own ads pasted over the top
And where does that leave services like google reader? If they decided to start using ads, in which of the two groups would you put them?
RSS readers are relatively new and will probably evolve in unpredictable ways. The distinction between what is a "feed reader" and what is a "web site" is already outdated.