i am an avid e-reader, because papers i think are total waste. also, it is easier to find articles in digital versions than having to go through the pile of all those printouts. but unfortunately i don't use any specialized reader tablet. i use my laptop extensively when at home and at school. if i am on the running, my android phone does the job. kindle might be the best out there, but newcomer tablets are also catching a lot of attention. mainly the ipad and the tablets manufactured by samsung, motorola and such. it also depends on your personal taste, so definitely do some research before investing your precious $$.
for highlighting, editing and all that stuff, any word processor will do fine. i use adobe professional (our school provides them for free, but you have to uninstall it when you graduate), but foxit reader is very nice if you want to go the 'free' route. and of course, if you buy dedicated e-readers, they will have their very own softwares to do all this.
i am pretty sure this depends on your field. liberal arts (roughly humanities, english, history, anthro, etc) must be the leading one on this. your field, my field, i say there aren't very many. and most texts used in grad schools are specially designed by the teachers. for example, all but one grad level class i have taken in my masters were text-free, where the professors put the materials together and gave to us - either in paper format or digitized. i am fine with digital copies as they can be accessed using laptops. we might still have long ways to go before everything comes to kidle-like-e-readers.