I don't think print books are going to go away. I was in a Borders last night, and it was doing a reasonable amount of business, not all of it books; the cafe was full, and lots of folks were buying non-book gifts. Brick-and-mortar bookstores are easier to browse and offer a social environment as well as more of a shopping experience. As long as enough people want that experience, we will have bookstores.
But what I can see happening is e-books becoming the new mass market book, with new authors publishing first in e-books, and then after they establish a readership, publishing in print. The publishing model of giving the author a chunk of money, with a cut to the agent, putting a lot more money into typesetting and printing the book, and then shoving it into stores to sink or swim will change. Once e-readers are pervasive enough, new authors will publish first as e-books, possibly only earning royalties. It's possible agents will need to be paid a fee as if there had been an advance, because otherwise editors will need to go back to reading their slush piles. Even with that, this reduction in costs should allow publishers to take a chance on new writers.
And I am all for that!