I agree that as they are in their early days there are still issues to be ironed out. but to address your points...
colour e-readers are already with us, but are generally based on TFT screens at the moment, colour e-ink is out but still in it's early days, it will improve and become more mainstream over the next year or so.
The kindles charge lasts about a month! if it runs out on you then you only have yourself to blame, but, battery life will improve as battery technology does.
It's not hard to make electrical equipment splash and dust proof and I'd much rather get a splash proof e-reader wet than a book, ink runs on books, it doesn't on screens!
You can loan kindle books for a period of 14 days and they disappear from your reader and appear on the other persons, but any problems with this aspect of it is due to licensing, not a restriction of the format and again expect this to improve as the format becomes more main stream... any media format has to be consumer driven otherwise it won't work so the consumers will get what they want eventually.
You also say
"This isn't the same as DVD replacing videos - It's more like trying to replace TV with YouTube"
That's going to happen too, it's already starting, just look at netflix, you rent your movie and it's available to be streamed to you.
Sure a lot of aspects of digital media are in early days... but it is going to happen and it will happen with music, movies, books, newspapers.... times are a'changing whether you like it or not.