Amazon's competition here is B&N or rather Amazon is introducing a product to compete with B&N's offering. Apple is in a completely different area.
I don't think so. It was almost a foregone conclusion that Kindle is almost certain to morph into a tablet. With EC2 they have a very strong ecosystem to tap into. Quite a bit of mobile apps rely on cloud to do the bulk of their processing. Amazon can lure all such application developers by giving them a big discount. And that is possible by using the unused processor cycles that Amazon currently has.
Having just an ebook reader is like having a cell phone with no other capabilities than making calls.