I think the basic argument here is consolidation. I realize that many people currently prefer the stand-alone e-reader due to its display advantages in sunlight, as well as decreased eyestrain during long reading intervals. There are also concerns among e-reader enthusiasts that a tablet will interrupt their reading experience with email notifications, tweet popups on the device screen, etc. while they are reading. I believe that with advances in tablet hardware and features, such current concerns will eventually be addressed. A future tablet may emerge offering a display that can toggle to an e-ink type mode. Such a tablet may also offer a do-not-disturb reading mode. If this tablet were competitively priced and could be made to the same weight and battery life specifications as current e-readers, it would severely impact the future viability of the e-reader market.
Tablets are definitely making e-readers obsolete. This is due to tablets being an overall better product. You can read books on a tablet and do a lot more things. People these days want a lot of features and tablets are better equipped to do that because they are a more powerful product.
The main reason folks buy E-readers is so they can enjoy the benefit of the E-Ink technology. While most tablets have LED screens that can strain eyes, E-readers E-Ink screens are tailored to perfectly mimic the "paper and ink" appeal, and cater to those who enjoy it. I, for one, much prefer reading on Kindles versus, say, the Galaxy Tablet. Both have their appeal, but they cater to different users. Tablet users usually want games and internet functions, while E-Reader users simply want to read books.
Although tables may cause fewer people to use e-readers, I don't believe that tablets are making e-readers obsolete because they are used for different purposes. A person who enjoys using an e-reader may not want all the bells and whistles that a tablet offers. As much as there are people who are always looking for more and the latest technology, there are also people who are quite content to remain with the simple technology that they currently use.