Two things:
First, readers and students have vastly different methods of accessing content. Readers chew through it from upper left to lower right, rarely back-tracking or caring where are within the structure of the book. It's all about the story. News readers are even less focused: they're all about the article. Students, however, range all over a book. They start a section, flip over to the index to find another reference to a term they are unfamiliar with, mark a sentence, go back to cross reference with a previous highlight, skip ahead because of the lecture order their professor has chosen - in short, they rarely, if ever, attack a book from upper left to lower right, line by line the way a mere reader does. That is why the Kindle fails them.
Second, Students don't want another device. They want something that works with the two devices they already carry: their laptop and their phone. They want the most powerful yet smallest device that will let them surf, Facebook, email, Twitter, shop, check horoscopes, and listen to music, and watch video without thinking about the technology. To anyone over 35, this is a nerd. To folks under 25, this is just using the stuff you're used to using. Sure, some of them will pick up a Kindle, and the really voracious readers in the demographic will like it and maybe but it, but the majority will see the $300+ price tag and say "No, thank you." (Actually, it will be much more off-color, but allow me the license.)
The company I used to work for makes a reader that meets all the qualifications you mentioned and more (creates highlights and notes, saves them in the cloud, download books, online access, range of subjects, works with PC and Mac, allows for searching through one, some, many, or all books at once, etc.) It's backed by a name that libraries, booksellers, and computer-savvy folks know well. It's been in use for over a decade. There have been more than a billion individual books sold in the format, yet few people know about it.
VitalSource Bookshelf.
Www.vitalsource.com/betterbooks
It's a division of Ingram Industries. Yes, same family as Ingram Book company, and Ingram Micro. They know distribution, and they are here to stay.
Go download Bookshelf (free) and grab a few free books to try, then see what other books you can add to your library. It's pretty good tech, based around what
students want and need, not what readers of newspapers and fiction want. You'll never (well, probably never) carry your laptop out to the beach, or curl up by the fire for a nice long reading session on your phone, but if you want to take your 15 textbooks and ancillary materials to Grandma's for Thanksgiving, having it all on your laptop is pretty sweet.