The Wikipedia article on e-ink indicates that the technology exists to provide thousands of colors on e-ink display. As I understand it most (all?) of the the 'multi-touch color display' screens are LCD not e-ink.
It seems there is at least one production color e-ink device, why are there not more?
I guess it is because having colors reduces resolution.
The Triton eink that is used in the JetBook referred to is basically a black and white eink display with a color filter on top. So for each 2x2 square of pixels there is one pixel each tinted red, green and blue and one staying in black and white. So effectively you have a resolution of 800x600 with the costs of a 1600x1200 display (plus the costs for the filter).
I think most people use eink devices to read pure text (without many images) and therefore prefer sharper text over colors. Of course this may change if there are more colored ebook devices and subsequently more colorful ebooks offered. It will be a recursive process.
So far it only makes sense to read colored textbooks on colored ink devices. I guess this is why it the new JetBook is manufactured with a 9.7" display. This may be too large for people who just want a reasonably small device for reading their novels. But the time of colored ebooks will surely come at some point in the future -- probably when the resolution improves further and the colors become more brilliant.
