The non-Windows user experience, in detail
There's a lot of FUD floating around on this discussion. I own a PRS-505 and I don't do Windows; here's my experience.
The reason for the buttons is that the PRS-505 uses an e-ink display. It's really slow -- the latency is around half a second -- so rather than a pointer-based interface it expects you to use an old-fashioned numbered-menu system to navigate between features. All the e-ink machines are like this, the Kindle included; it's the price you pay for a device with the contrast ratio of newsprint that'll run for a week between charges.
I find the PRS-505 usable, despite that. It charges over USB, and exports its internal memory (and the SD or MS cards, if either are installed) as USB mass storage devices.
Stick an RTF, ASCII, PDF, or LRF file in the right directory and the PRS-505 will display it. (LRF is Sony's proprietary-ish file format. If you're a non-Microsoftie the reason for converting RTF files to LRF is that the PRS-505 can pick up metainformation tags like author name and title from the LRF, thus making it easier to find if you've got a lot of files on your machine.)
The PRS-505 will *not* read Microsoft Word files as-is (but you can convert them to RTF using OpenOffice or, on the Mac, textutil).
The PRS-505 will display PDFs. Since the July firmware update it's supposed to support PDF reflow as well, reflowing text to fit the screen better. (I haven't tested this.)
The PRS-505 supports the newish ePub ebook format, which includes DRM support (it's not mandatory) and is promoted by Adobe. To that extent, they seem to be stepping away from their previous committment to LRF, and before that, to BBeB (which nobody else used).
If you're a Mac or Linux user, the Calibre tools (calibre.kovidgoyal.net) will let you convert a variety of ebook file formats into LRF and sync them with the PRS-505. It includes HTML conversion and web spidering, so that you can grab various magazine/news websites and stick them on your reader. The only features of the PRS-505 it *doesn't* support are DRM and access to the Sony ebook store. There's loads of content on Project Gutenberg, and a lot of free books on the internet that you can download legally; more info at www.mobileread.com.