Electronic ink or LCD: which is better for which application and why?

Definitely E Ink.
E Ink (or more generally electronic paper, of which E Ink is just a variant), was designed to mimic the appearance of regular ink on paper.
Light is reflected on the display, and no power is used to display a page since the electronic ink is bi-stable. E Ink (as mentioned before, a former MIT-spinoff) is currently employed in most if not all electronic paper-based e-book readers on the market. But other technologies are said to enter the market as early as this year; some of them might flexible, others could even offer colour.
What are your thoughts on the rumoured Apple iSlate: will it really be the start of the mainstream adoption of ebooks? Is it a threat or opportunity to ebook makers and suppliers of content? For instance, does Apple have the ability to do to books what it did with music, mobile apps and films?
Apple is surprisingly late. Members at MobileRead love to humor Steve Jobs with a quote of him saying (back in 2008, when the Kindle arrived):
"It doesn't matter how good or bad the product is, the fact is that people don't read anymore." I think Mr. Jobs has underestimated the importance of e-books and also the quick growth that Amazon has experienced with the introduction of the Kindle.
Don't get me wrong. Apple entering the market would be a fantastic thing for the e-book movement, and if we can see the much-rumoured Apple Tablet to become true, then I am convinced it will foster the mainstream adoption of e-books - which has already began since the introduction of the Kindle btw. Apple produces wonderful devices, and they have a way of gathering the crowd behind them, so, yes, it is quite possible that they would be able to do the same to e-books as they did with music. I am sure Barnes and Nobles, Borders, and all other brick and mortar shops are dreading the moment.
What are some vertical markets (applications or content) that would benefit from e-readers that are yet to be well represented? For instance, professional services, technical, health etc? How might e-books slot into these areas?
It's too early to tell, since, as far as I am aware of, there've been almost no professional applications of e-book devices yet. One application I am aware of is the iRex iLiad, one of the first e-book devices that was released by the Dutch company iRex. One OEM application, the ARINC eFlyBook, targeted private, commercial and military airplane pilots. My guess is that before e-readers will be more readily applied in professional services, the display technology will have to improve further. Color and higher resolution are two major decisive factors.
What are the unintended consequences of digitising printed matter for use on e-reader devices or across the web? Are digital books just like real books but only better?
It's not necessarily a matter of better or worse. In the beginning, people thought that e-books would have to do the same thing as printed books, and of course they would have to do it better, else why switch.
Nowadays, with new mass-production-ready technologies at hand (e-paper, wireless connectivity), the focus lies on content, convenience, and portability. E-books are there not to substitute e-books, but to complement them.
Can digital magazines (eg zmags) coexist with ebooks? Will the two merge? (ie which e-reader devices also display flash through a web browser?)
I don't see a reason for a digital magazine not to offer their content on e-books as well. Flash is merely a technology poshing up the Web; what matters is the underlying content. The beauty of today's world of technology is that many things got standardised. Many if not most publishers have their content in some kind of documented XML raw format, that, when used with the right software tools, can be automatically converted to a (reflowable) format for e-books.
Continue to page 3 to find out when the printed book will die.