You can read books on the iPad but it sucks after a while as eye strain kicks in. The Kindle is much better for reading books.
The iPad is good for multiple uses and I am seriously thinking of getting one and I am definitely not an Apple fanboy.
With the rumors that the 2G iPad will get a higher-resolution display (either 1280x768 or 1280x960), that means the text will be much easier to read since with higher resolution you can better use font anti-aliasing effects to make them look better, similar to the ClearType font display technology Microsoft used since Windows XP. I've seen how this anti-aliasing technology works with the Barnes & Noble Color Nook reader and the results are amazing: incredibly clear typefaces on a color LCD screen.