I've had my Kindle Touch for a while now, and I have to say, I like it better, over all, than my old Kindle 3 (a.k.a. my husband's "new" Kindle Keyboard), but there are few things I think the K3 did better. For me, typing is much easier on the touch screen, which is great for searching in books and in the Kindle store, and for typing passwords (as when you log onto a new wireless network). I can still read one-handed using the tap feature to go forward a page, which is great.
But sometimes I brush the screen without meaning to and the page flips forward or backward! I'm sure I'll get better at that over time, but for now, it's very annoying.
Using collections is definitely easier with the KT, as is navigating pages and pages of home screen, which is what you get when you have hundreds of documents on your Kindle.
While making annotations is easier with the KT, reading them was actually a little easier on the K3, at least for my own manuscripts and other documents. When you annotate a Kindle book, the annotations go into a special file, and every annotation is linked to where it occurs in the book. When you have the book open and use the menu option to view the "Notes," you get a list of these annotations (and with the KT, the highlights are intermixed). What you actually see in the list is a snippet of text that occurs right after the annotation and the annotation number, as if it were a footnote. With the K3, you could move the cursor down the page, to each annotation in turn, and the text of the note the cursor is on displays at the bottom of the page. With the KT. in order to read what your note says, you have to tap the annotation number, and that opens that note. But you can't tap it too long, it takes you to that part of the book. It has taken me a while to get the hang of that.
For Kindle books you buy from Amazon, it's actually easier to go to your Highlights page on the web (kindle.amazon.com/your_highlights) where you can not only read them more easily, you can copy and paste them if needed. However, when I use the Kindle to proof one of my own manuscripts, the annotations and highlights don't appear on that web page, which is very annoying! I have observed that the manuscripts and other files I send, including non-Kindle books, (Amazon calls them all "private documents") do now go into my Kindle archive, which is nice.
So overall, the KT is still better, but what I really want is a hybrid Kindle, with no keyboard but with page forward and backward buttons on the edges, and a screen you could turn on and off for touch activation. That would be cool!