OK, just got the Kindle 3 today. (I refuse to call it "Kindle (latest generation)".)
In short, I feel that there is no dramatic improvement in any quarter, but that each of the important aspects are improved just enough that it matters. Contrast is a bit better, speed is a bit better, size is a bit better, and usability is a bit better (better button placement and feel, now there's a back button on the right as there should be).
(New one on the left in both photos.)
It's funny how the improved contrast feel like the text is sharper, only it's not. But I think better contrast does this also in photos. A print with too-low contrast will feel less sharp, despite that it may be pin-sharp.
If they can do this once or twice more (improve contrast by 50%), then it'll be about where I think it oughter be. But this is usable.
Man, how time goes when you're having fun. I "just sat five minutes" to play with settings on my new toy, making this post and such. And when I was done, my tea was cold... in my Thermos mug! It had been two hours. Dang.
I have now been reading a bit on the K3, and I'm pleased. The differences, especially the screen contrast, are just enough that with good lighting it is very easy to read, finally.
And also this means that I have decided what I've been in doubt about: yes, LCD screens are a bit harder on the eyes, this is more relaxing. This seems obvious to some, but I've not had good comparisons, because in print, text size is usually a compromise between readability and space concerns (and aesthetics, small text looks great if you don't have to read it), and perhaps white paper is actually a little bit too white. For me it seems that a very light grey with black text is ideal.
BTW, the K3 is so light and small that the leather cover doubles the weight and bulk!