They're still at the head of the price curve if you look at the price that matters: $69. you don't really need a touch screen, a glow light, and the ads are not a big deal. Kindle is still the cheapest real player in the e-reader market.
I probably won't be upgrading from my 3rd-gen kindle either, but somehow i doubt amazon cares. I'm sure they make more off of book purchases from 3-year-old kindles than they do from the sale of new hardware. They want to sell kindles to as many people as they can, but once you've got a kindle all they need you to do is keep buying content.
I rarely do searches on my Kindle 4, and when I do there's a not-as-cumbersome-as-you'd-think-but-pretty-cumbersome-anyway keyboard that you can use. In exchange, I get a smaller, lighter Kindle that's easier to pack around.
That said, the physical page-turn buttons are the best part. Without those, I'd never use the thing.
Maybe it's just me, but there are circumstances when I prefer a good index to a text search. If a term is informally introduced and used a couple of times in the few pages before it's defined, for example, I usually want the formal definition, and I can just remember that that's the second index entry rather than the first rather than Ctrl-G-ing my way through a bunch of uses.
I probably won't be upgrading from my 3rd-gen kindle either, but somehow i doubt amazon cares. I'm sure they make more off of book purchases from 3-year-old kindles than they do from the sale of new hardware. They want to sell kindles to as many people as they can, but once you've got a kindle all they need you to do is keep buying content.