I am not certain that this is a "replacement" for the traditional Kendle. This is more of a direct introduction into the Tablet PC Market.
I heard an analysis on the Wall Street Journal(radio) this morning of the device. Seems that in the demonstrations only Amazon Employees interacted with the device, the design and build was outsourced, and the next edition KFire design is expected to be much more Amazon influenced. The real shaking that the KFire is making is that the price. 199 is considerably competitive, and will do much to promote the Kendle Market Name provided there are no real drawbacks to the device. Next it will be supported by cloud computing technology in which movies and books will be available in the cloud (external storage) for those who have placed them on the device.
The real downside to the technology in my opinion is that the device has a meager 8 GB which is about half of the base models available.
Next, this is simply a low end touch screen tablet. The real bonus to the traditional Kendles revolve around the E Ink electronic paper that simulates reading paper and facilitates low power consumption as well as "no glare" reading. The KFire is really in the "Tablet" market, not the EReader market in my opinion.