Reading your post, my sincere impression is that you bought a crappy e-reader. Not even my old Hanlin v3 was that bad (it never faltered on page turns for one).
I own multiple Kindles and owned an old Hanlin v3 (the one for which there was an alternative GPL firmware).
Regarding the software flaws you reported, the only ones present in a Kindle is lack of tag support and cross reference between books. Myself, I never missed these.
At least for English the Kindle uses the Concise Oxford English dictionary, which is quite good. Never saw it slow down for books of any length (although it is slow for some heavy PDFs). Never missed a page turn. Collections work as expected.
Some (quite technical) people (specially on slashdot) seem to have some aversion to the Kindle on the grounds of its internet connection features. I find that remarkably silly given how technically competent these folks seem to be and the fact that --should you care-- you could just turn off the WiFi/Radio and never turn it on again. You can even upgrade its software withOUT turning Wifi/Radio on.
IMHO text typesetting in a Kindle has a lot of room for improvement, but then that is also true of any other e-reader (tablet, phone, kindle etc) I tried to use.