It seems there is a healthy market today for both e-readers and tablets. In fact, ownership of e-readers is growing faster. "A new Pew report shows that the number of U.S. adults who own a dedicated e-reader (like a Kindle or Nook) has doubled since November 2010, to 12 percent... Pew found that 8 percent of adults own a tablet, compared to 5 percent in November 2010." I think that part of the reason for the e-reader faster growth is the significantly lower price point. And while the e-reader has some limitations, it is starting to become more web friendly. At the same time, it has a better screen for reading, lighter and easier to carry, and for it's primary use, does exactly what it needs to do.
In my own household there is a desire for both a tablet and e-reader. As a commuter, the ease of transporting a reader verse a heavy book is the primary appeal. And with an iPhone in her pocket, she will have the world at her fingertips.
Certainly at some point in the near future, there will be a convergence of these two products. The tablet will get lighter and thinner. It will switch from a rich graphical display to an easy to read print face (especially when bright sun is present), and may be flexible enough to perhaps even be rolled up for transport in a pocket. But until then, the e-reader of today has a great growth opportunity ahead of it.