I went through this when I first got my iPad. My killer app is color pdfs with nice figures. (biochemistry/bioinformatics) I tried GoodReader, iBooks, Stanza, and one other that I can't remember now. I also wanted: borderless full screen, tap to turn, quick page turns regardless of file size, and the ability to scrub between pages. I settled on Stanza, as it has those features and seems to integrate with Dropbox in a reasonable manner.
My litmus test for file size was a 300dpi scan of Envisioning Information by Tufte (came to nearly 450MB?) It was quite usable with fast page turns. It did crash once in awhile, but other readers would not even load it.
Stanza's epub performance apppears to be good. I have only really tested it with brutal PDFs, to be honest, but I use it nearly daily.
My workflow is this: read rss from PubMed/sites with filters. Read abstract. If I like it, put it in Dropbox/papers. Then, before leaving work/home, sync the files on Dropbox. Read on train/at leisure. I make notes in SimpleNote. I don't really like PDF annotations because they are generally non-standard and easier to lose/messup.
Hope it helps!