$800 for the new "Honeycomb" Android 3.0 Motorola Xoom sounds silly to begin with, but after looking at the stuff that's out there -- free! -- even for lower-end devices, it strikes me as completely insane to fork over more than $200 or so for an Android tablet.
I'm really grooving on my new Velocity Cruz Reader -- an Android 2.0 ("Eclair") tablet that sells in the $100-$150 range as an "ebook reader" but does a lot more than just hooking you in to the (pre-installed) Borders ebook app. Even without direct access to Google's "Android Market," the Cruz makes a number of apps available via its own "market," and has hooks to other sources. Also, a little web searching works for finding direct downloads of app package (.apk) files.
Four free apps that have a permanent home on my tablet:
Daily Paper
Before I had the Internet, there was little I loved more than picking up a copy of my area's daily newspaper with my morning coffee, checking out the headlines and op-eds, and browsing the other sections throughout the day when I had a spare minute.
Daily Paper is a set of bookmarks formatted as an Android app, but what a set of bookmarks! 110 newspapers in 10 languages, and I'm holding them in my hand instead of scrunching over a desktop monitor. No plugging quarters into a streetcorner machine; I just choose my paper (for reasons of my own, I have three daily habits -- the UK's Guardian, the New York Post and the St. Louis Post-Dispatch) and go.
FBreaderJ
I've used the Borders app and Amazon's Kindle app. Barnes & Noble's Nook app is supposed to work on the Cruz, but kept crapping out on me.
FBReaderJ is a free, open source ebook reader that handles the standard epub format as well as some others that I haven't tried yet. In terms of performance and ease of use, I like it better than the commercial apps. There's also a desktop version without the "J" at the end.
Of course, there's the access question -- "Digital Rights Management" means that you can't buy your books in proprietary format and then read them in FBReader. But there's lots of free and paid stuff out there (classics, public domain, material published commercially without DRM, etc.), tools are available to strip DRM and convert files, or you can just plain "pirate" the goods.
I'm not going to go into a long argument on the subject of "intellectual property" here. If it pleases you to pay for the books (and I hope it does), pay for the books. But once you have, there's no reason, IMHO, to feel constrained to only read them in the format you paid for. You were paying for the right to read the book, not just for the paper it was printed on.
Example: There's an author whose name you'd certainly recognize and whose books I love. I've purchased all but one or two of his books in "dead tree" format (in one case, several copies in both hardback and paperback), and will buy the others when I come across them. I also pay his company a continuing subscription fee for access to an ongoing collaborative fiction project he's involved in. So no, I don't feel a bit guilty about downloading "pirate" epubs of the books I've already bought from him, to read on the tablet. Yes, there's "something about a real book," but in this author's case that "something" is that the "real book" weighs out at 2-3 times as much as the tablet.
Anyway, check out FBReaderJ. If nothing else, I predict you'll find that it serves you better for reading the free stuff than those commercial/proprietary apps do.
Pandora
You may very well be familiar with Pandora already from the desktop version. It's streaming "Internet music radio" cooked to your own tastes in custom-made "stations" based on a "music genome" (you like Band A; Bands B and C sound like Band A in some specific way, so their stuff shows up on your "Like Band A" station; you can use "like/don't like" switches, add elements, etc. to nudge it until you're happy with it).
Pandora's Android app brings the music to your tablet. 40 free hours a month, paid "unlimited" plans available.
ZumoDrive
ZumoDrive lets you sync files between your tablet and desktop computer. It also allows you to stream MP3s (and, supposedly, your iTunes playlists, though I haven't been able to get that to work yet) on your tablet from your PC via Internet. One gigabyte of storage/sync space is free. A second free gigabyte can be earned by going through the ZumoDrive tutorial and referring friends. If you need more space, it's cheap.
Two gigabytes may not sound like a lot, but even that much is a pretty big load to remove from your tablet's onboard/SD storage.
News, books, music and sync/storage -- all free, all available even without Android Market access, all compatible at least as far down the version ladder as Android 2.0.