I have been using Microsoft Reader on two Ipaqs, use it at the moment on my MWG Atom and hopefully can continue using it on my next WinMobile HTC Touch Diamond2. I have read (yes, really) hundreds of books using Microsoft Reader. At the moment I am reading J.G. Ballard's Complete Short Stories.
You can buy LIT-books from Fictionwise and probably from other online shops. Manybooks.net and Munseys offer Gutenberg and other free ebooks in .LIT. And if .lit is not available you can roll your own: Michisoft Reader Studio is free (though not actively developed any more) and can convert html and text files to lit.
The only gripes I have against Microsoft Reader is the stupid activation system and its very rudimentary library features and ok - the proprietary .lit format. But then - the other readers I've tried have not been any better. Still looking for the optimal reader, but meanwhile Microsoft Reader will do. And nice to hear it is still being developed
