In the two years that I've owned my Kindle, I don't think that I've ever used the keyboard (at least not intentionally).

Same. But I know others (like my brother, a student) who use it a ton.

They can keep selling the Kindle3 with keyboard for those who want it.

I find the keyboard invaluable for the search functionality on a given text. Simple examples: searching the Economist for all references to the ECB (i.e. looking for euro crisis related news); searching A Game of Thrones for Kinslayer to figure out which character was introduced with that nickname.

I don't take notes and tweet them, but I do search for books in the online store via whispernet. I have no idea how that's going to work on this device, probably something like registering your name on Zelda, which will be a pain and probably not worth the real estate.

I've always thought it was retarded to include a hardware keyboard on a device that will be used ~95% of the time for reading stuff. It's a really smart move to remove it.

Reading can be passive or active. As an active reader I highlight and annotate my books, so the keyboard is invaluable for me.

Some sort of stylus would be a more natural fit for that. A keyboard would just slow you down (selecting text, marking it, annotating)

Agreed. This might be ex post rationalization, but the keyboard helps me form thoughts. I've got no problem with it (but we definitely agree on the stylus).

I'm a fairly heavy user of the keyboard to highlight and annotate lines/paragraphs/sections of books. Some of the keys have completely faded :(

I use the keyboard quite a lot, for writing notes. It's amazing how reading a non-fiction book is so much more rewarding if you make highlights and notes. If you're thorough, you can read just your highlights and notes and effectively re-read the same book a year down the line in about 10% of the time; and still refresh your memory well.

I use it for shopping for my next book when I'm too lazy to get out of bed and go to the computer.