Despite the fact that Apple’s iPad has been met with near-universal criticism since it was announced at the end of January, it would seem that Apple has still managed to at least change the dialogue in the e-Reader sphere and cast doubt on the viability of Amazon’s current stable of readers. The iPad might not be able to multitask, or display flash, or have any use at all out in the sun, but it’s raised the expectations amongst those who would prefer to see e-Readers move to full-color touch screen displays.

The prospect of an Amazon e-Reader with such a display is actually much closer than I think many of us were led to believe. The New York Times recently reported that Amazon has acquired a small New York-based startup by the name of Touchco, whose specialty it seems is developing touch screens that are significantly cheaper than the ones used by Apple. No sooner was the company purchased than they were rolled into Amazon’s Kindle division and disappeared from sight.

Interestingly, Prime View International (PVI), which currently produces the Kindle displays, has come out and said that they too will be releasing technology for a color multi-touch display this year that will feature support for animation. It’s unclear at this point whether Amazon intends to implement ideas from both companies or whether PVI is going to get the boot in favor of Touchco.

It’s no secret that Amazon has been active about trying to figure out ways to eat Apple’s lunch. They’ve already enlisted developers to start coming up with games for their platform, which makes much more sense if they’re developing a color touchscreen display than with the Kindle’s currently unwieldy e-Ink technology. And we’ve been talking about the possibility of a Kindle App store since last December.

The problem as I see it is that Amazon can’t hit Apple where it hurts without compromising the integrity of their current e-Reader technology. Try going outside with your Kindle and an iPhone with the Kindle app and tell me which one is easier to read with all that ambient glare. The Times reporter was saying that Touchco’s technology is intended for use with LCD technology, but that’s not a direction Amazon can go without sacrificing both readability and battery life.

Of course, this is a distinction that so-called “experts” and industry analysts seem to miss in this equation. For somebody just looking at this scenario from the point of Amazon’s stock price, going after the same market as an industry-leader is the only aggressive move one can make. But as people who actually read books on our e-Readers, an increasingly novel concept, the future seems much murkier.

Color displays and touch screens could greatly improve the vibrance and intuitive user interface of the Kindle, but they’re just not necessary for reading. We can just hope that Amazon doesn’t lose sight of that in the coming months, and we’ll definitely be keeping an eye on any future mentions of a Kindle Touch.