I've had good experiences using Calibre to convert pdf files to epub files. Before converting, I had to scroll across and down each page separately. After the conversion, the document worked just like any other epub file. That is, like a small book. I've been very pleased with Calibre as a desktop library manager that…

"collections" - I'm afraid not. It only supports a "library" (everything stored on the device) and a "shortlist" (a sub-set of the files in the library.)

I recently bought the kOBO reader. It was about $110 at my local (about to close) Borders Express. It's my first ebook reader so I don't have anything with which to compare it, but it seems to work ok: it displays epub files, reads pdf files (a primary reason why I got it), and responds reasonably well to my touch.