There is nothing wrong with the Kindle Fire and it is likely to do very well as a top end Kindle. If you compare the tech spec with iPad 2, you will find the norm with any other Android tablets on the market today. Shorter battery life, slightly thicker, smaller screens, etc. In fact, it is hard to find any tablet on the market, not even for more money, to be “better” than the iPad in every technical aspects.
But the Kindle Fire will likely cause more damage to other tablet makers as they are selling at just $199. Not to mention throwing in a month of Prime account to sweeten the deal further. Like for other Kindle models, it is commonly accepted that Amazon subsidized the device to make money from the content. It will be very hard for other competitors to quickly come up with a complete solution that takes care of payment as well as content.