If it was a stronger market I'm pretty sure that Apple would have jumped in this business.
I agree that their odd semi-walled garden of an ecosystem is a pain in the behind. Amazon provenly has a lot of server capacity all over the planet. Why not use a fraction of a point of a percent of that to make the Kindle readers feel a bit modern? :)
A 12" kindle with a proper note-taking mechanism and stylus support for less then $500 would be dream come true for me - and probably many other uni students as well.