CKS, what kind of fanfic do you read?I read a lot of Star Trek, some Highlander, some Tudors, and just finished a 26-chapter novel about the Borgias. This is all on fanfiction.net, but I also have a growing collection of physical fanzines - mostly Star Trek (Classic only; I don't care for most of the Next Gen stuff), some Highlander, Doctor Who, and crossovers.
These days I mostly am reading Stargate, Xena and Xena ubers, Lois & Clark, and random crime show stuff by authors I recognize. Long stuff I'll put on the Kindle; short stuff I read on the computer. I've discovered that I really want to download it onto my desktop and copy over rather than use the Kindle browser, though. Since a lot of the older stuff is text files, it is sometimes convenient to reformat it before putting it on the Kindle, too. Otherwise you can end up with weird line breaks in almost every font size.
I'm not big on illustrations, but some of my fanfic has cover artwork, and it looks just fine on the Kindle to me. It has plenty of resolution for me - my eyes couldn't deal with a smaller font anyway.