Update: This app was just released this morning in the app store and can be found here: [iTunes Link]
I've done quite a bit of testing of eBooks, and quite honestly I've had a problem with the concept of reading a whole book on an iPod touch or iPhone. At a normal font size, an eBook can display about 75 words on a single screen. This requires even a rather short book to be hundreds and hundreds of screenfuls. My well worn copy of The Adventures of Tom Sawyer comes in at 218 pages which in the app Classics2Go [iTunes Link] translates to 813 screens of iPhone/iPod touch text. I know that this isn't a problem for a great number of people, but I haven't finished a book yet. There is too much flipping, and no matter how pretty the presentation, it just doesn't feel right to me. Your personal preferences may vary, of course.
The Colossal Short Story Collection app, currently under Apple review, solved my problem almost entirely. Contained in the app are over 2222 short stories, all in the public domain, that can be read in 15-20 minutes each. The vastness of the collection assures that you'll always find something that you want to read by authors ranging from Hans Christian Anderson to W.B. Yeats. An average story is around 30 screens. If light entertaining/distracting games can be referred to as casual gaming, this would be an app for casual reading.
I found that reading short stories on an iPhone/iPod touch is very enjoyable and not once did I get frustrated by the page size and number of pages/screens. Nothing got in the way of the story. Reading short stories seems like the perfect use of an eBook. Everything is in byte-sized pieces and I never had to make the considerable commitment that comes with starting an 800 page novel.