I also have the case and yes, it does work as advertised with the touch screen, in fact I would even say the touch screen is actually more responsive.
The air bubble issue was a problem for me as well, but I found a strange solution. If you rub the screen against your face to get some of the oils from your skin onto the phone before placing it in the case this will eliminate the bubbles. The only negative I have found with this solution is when the phone is off, the screen will look cloudy, more of an aesthetic problem really.
For those looking for a device strictly for reading, the new Kobo is a nice little option. It's small enough to slip into a pocket, can do more with a PDF than the competition, and at $129, it's $10 cheaper than both the Nook and Kindle WiFi.
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I also have the case and yes, it does work as advertised with the touch screen, in fact I would even say the touch screen is actually more responsive.
The air bubble issue was a problem for me as well, but I found a strange solution. If you rub the screen against your face to get some of the oils from your skin onto the phone before placing it in the case this will eliminate the bubbles. The only negative I have found with this solution is when the phone is off, the screen will look cloudy, more of an aesthetic problem really.