I had heard that the knock on tablets over e-readers is that e-readers worked much better in the sunshine? That true? Are there any tablets that work well in sunlight? Some that are particularly bad in sunlight?
It's called digital ink technology and it makes the text look more like the printed word. It works well in sunlight.
Many tablets nowadays can be used as e-readers and vice versa. One example is the Pandigital Color Novel that sells for under $70 on e-bay. It was only meant as an e-book reader but you can install an Android firmware on it and voila, Android tablet with e-reader app.
The Barnes & Noble Nook Color can also be converted easily to a tablet with an Android firmware.
IPAD2 has as an e-reader that works well in bright sunlight too, but then you will have be able to tolerate owning an Apple product. :P
Myself, I would first decide how much you want to spend. Then look at both e-readers and tablets in that range. Then look online to see which tablets have a good e-reader app and which e-readers can be converted to tablets.
The trouble with most of the color based "e-book readers" like the iPad, or other Tablet that use LCD/LED displays, is that they tend to have a glossy finish. There are a number of anti-glare adhesive films you can apply to the screen.
Being an owner of an iPad 2 in a desert (very bright) environment I can say it works "okay" without a film if you turn the brightness to max and keep the screen clean. It is also fairly reflective so you can bounce sunlight off the glass front at the right angle.
You can think of e-ink based displays like advanced an etch a sketch. Part of the reason it work well in sunlight is that it uses a reflected light display vs the typical backlight/projected LCD/LED ones you find in TVs and computers. Little the ink particles work just like paper ink does, reflecting ambient light
E-ink = reflected light ~= book
LCD/LED = projected ~= light bulb
For tablets, some are trying alternate screen technologies to deal with this issue. The Notion Ink Adam* was the first to use a Pixel Qi screen, and I believe other tablet manufacturers are looking at that or similar for some variants. I've got an Adam, but not the Pixel Qi variant as I don't read in direct sunlight all that much and so just went with the cheaper LCD. For my use, I'd agree with Dorje that maxing out the brightness and keeping the screen clean helps out. However, any LCD screen is just no comparison in sunlight to any e-Ink screen I've seen.
*General note, I got the Adam as an inexpensive Android device I knew I could mod and I'm really happy with it--I wouldn't recommend it for folks looking for easy, off-the-shelf, no fiddling products. If you don't mind rooting a device and learning how Android ticks, though, it's been nice and the company works more openly with alternate ROM developers.
I had the Notion Ink Adam with the Pixel-Qi screen and the PiQ screen worked wonderfully under bright sunlight provided I had a anti-glare film on it, otherwise the glare from the glossy finish made reading it comfortably next to impossible.
I have changed tablets to the Samsung GTab 10.1 and reading under bright light isn't a major problem. I all have to do is keep the screen clean and turn the brightness up to maximum.
*General Note, I got the NI Adam so I could learn about rooting and modding Android devices with out the danger of bricking my phone or GTab.*