I think the kindle is totally the way to go - since the new kindle fire is way better then the color nook (it's a complete tablet), and the monochrome kindles offer more features for less then the monochrome nooks. You can get a good deal on kindle ereaders here:
http://www.shoppersource.net/goto/kindle_store
I wouldn't worry about the cost for two reasons - most commercial books are between $2-10 - so they are pretty affordable. But Also, amazon is rolling out library overdrive support within the year, so you will be able to borrow new kindle ebooks from most libraries soon.. so your going to get the best of both worlds on a kindle.
Which model you should choose really depends on your needs.
The basic monochrome e-ink kindles are best if your primary goal is ereading only since the screen has no backlit and you can read for hours at a time with no eye-strain.
You might consider one of the 3g e-ink kindles if you love the web, since with those you can browse blogs/news/facebook etc anywhere (vs just wifi hotspots on the basic wifi only kindle).
If your primary goal is a color tablet for web browsing and software (and only secondarily an ereader), then the new kindle fire is the best choice. On the con side it has a regular laptop screen, not e-ink, so not as easy on the eyes for long term reading, but the kindle fire web browsing can handle flash & youtube & you can run thousands of google android software apps on it, in addition to accessing moves/music and ebooks. The kindle fire is very much like an ipad functionally.
I personally have the 3g keyboard kindle, which I love since I can store hundreds of ebooks on it, has great battery life, can browse the web to read news/blogs/facebook etc anywhere, and has a backlit free screen so it is comfortable to look at all day:
http://www.shoppersource.net/goto/kindle_3g_keyboard