This is a great question. I bought a Kindle 3 a month ago or so to self-study Cisco certs, so I now have working knowledge of this dilemma.
First, Kindle was designed using the e-ink display to avoid glare and backlighting, which I thoroughly enjoy. Some people are affected by backlights and some aren't, but I am and I tell you it's great. This was the selling point for me, at least enough to give it a try. Not sure how the subway/bus is for lighting, but if the surrounding light is good then Kindle is the way to go.
Second, form factor is 1000x better than having hard copy. I love to keep my book collection at hand, and I don't have to carry around a 5-pound textbook everywhere I go, especially for studying.
Third, and most importantly, as Andrew says, Kindle is awesome for "books." By that I mean books that are meant for reading, cover to cover. Tech books are typically NOT meant for reading cover to cover. During my studies for the first Cisco cert, I used the Kindle book exclusively and found it challenging to hop from one part of the book to another (such as practice questions that had answers in the back). Perhaps this is improved in the Kindle metadata for the book, or perhaps this is improved in future Kindle releases, I don't know. All I can say is, right now, it was not intuitive.
Fourth, your fears about graphics are true - sort of. In my Cisco book (Kindle version, might I add), graphics were decent. The type embedded into the images was a bit hard to read because of the small font scaling, but the rendering was legible. If you have a PDF version of the book and either did a straight copy to device or a convert through the Amazon conversion service, graphics were pretty terrible. If you go with Kindle, be prepared to purchase the Kindle version.
Side note: I did pass the CCENT test with just the Kindle book (and experience).
In summary, Kindle is great for normal books, but for studying you will pay a price for the form factor. I will continue to use my Kindle for studying the material since I pretty much do read the text books cover to cover, just to absorb the info. But, when test time approaches, get ready to bust out the hard copy.
"Live as though you would die tomorrow, learn as though you would live forever."
CCNA, MCSA, MCTS, Sec+, Net+, Linux+, CEH