Would they have their own e-book store like all the other players seem to have? Introduce their own DRM format? I think these things, requiring licensing deals with publishers, probably take up a big chunk of the price for competitive devices.
And it looks like they're not using "e-ink" displays but normal LCD touchscreens (i.e. rotten battery life compared to the competition and less ink-on-paper look, but full color, backlight, and better response time). That probably accounts for a lot of the price difference.
Also, one of the selling points for Amazon's device is the 3G connection, meaning you don't have to be near a wireless hotspot to get new books. I'll bet the Asus Eee Reader uses normal g/draft-n wireless.