One thing that hasn't been mentioned:
The less expensive model's battery lasts longer between charges. (Don't take my word for it -- check the website.) For me, battery power's more important than the ability to make a book purchase anytime, anywhere.
Once you have your Kindle for a while, you'll find that you'll build up a huge backlog of books -- you won't be able to turn down those free books! So although you might not be able to purchase that new best seller while riding a train through who knows where, you'll have something new to read.
What I wouldn't buy: The one with the ads. That'd be annoying, and the price difference is small.
Actually, the Special Offers Kindle has been fine. I have another Kindle (as well as a DX) but I was interested enough to order the Kindle SO to see what was offered.
So far, I've bought a $20 Amazon gift card for $10, ordered a new Kindle lighted cover for half price (actually I ordered the full price lighted cover, didn't open it, and today printed a return label for it since the special offer 50% discount came up), and 6 Audible books for $6 (I'm an Audible.com member so this extended my contract by 6 months and essentially gave me 6 free books).
Oh, and I bought a book from a pre-selected list and used my VISA card to make the purchase (easy since it's my default credit card on Amazon) and got a $10 credit on my Amazon account. The book I bought was $8.93 so I "made" $1.07 on that deal lol.
These are offers for products I had or would have bought anyway, so I've "saved" the equivalent of about half the purchase price.
The ads aren't really annoying - they take the place of those awful screen savers and then are small banner ads at the bottom of the Home screen. Once you select a book, you don't see any ads while you are reading.