I upgraded from a Kindle 2 (kindle keyboard), to a Kindle Touch, to a Kindle Paperwhite.
I love the paperwhite. If they can make the lighting a little bit more even and very slightly increase the refresh rate of e-ink, maybe even adding color, it would be a perfect device. The important thing for e-ink is the battery life. I love being able to use it all week long at work for a few hours each day and not having to plug it in once.
I'd definitely recommend a case, it imporved the experience tremendously of both my kindle touch and paperwhite. I was concerned that the paperwhite's "backlight" wouldn't be as good as the case light on the kindle touch, but it turned out to be better in every way imaginable, and much easier on my eyes than an LCD backlight.