I want my annotations from my kindle 2 to be exported into, for example: Microsoft Word. I was curious if this was possible, and if so, how to do it. Thanks in advance!

You need to do whispersync with your Kindle 2 device first. See "Managing Your Synchronization Settings" section on the official page here for details:

http://www.amazon.com/gp/redirect.html?ie=UTF8&location=http%3A%2F%2Fwww.amazon.com%2Fgp%2Fhelp%2Fcustomer%2Fdisplay.html%3Fie%3DUTF8%26nodeId%3D200450690%26ref_%3Dhp%5Fpcland%5Fmyksync&tag=elec-m-20&linkCode=ur2&camp=1789&creative=390957

Hope it helps

I was thinking of an iTouch for the ebook apps but I’m not sure if it would be a good investment. I don’t really want a Kindle they seem too constricting, any advice would be great!

Very few ebook readers read .LIT files, but at least .LIT is easy to convert to other formats. Calibre, free at http://calibre.kovidgoyal.net, will convert non-DRM’d lit files to ePub.

The Astak reader (http://www.astak.com/product.asp?serial=05EZBLK ) reads probably the most filetypes of any of the e-ink readers on the market right now, including both PDF and LIT. The iTouch is a good overall device, but not great as an ebook reader–if you want all the other features, it can work out, but if you’re mostly looking for an ebook reader and won’t miss the other apps, a dedicated reader is the way to go.

Mobileread’s "Which One Should I Buy?" forum is at http://www.mobileread.com/forums/forumdisplay.php?f=123 and can help you decide which ebook reader would work best for you; they talk about the pros and cons of all of them.

iTouch is actually not designed for reading purpose. I’ve given my opinion about reading on the iPod and real ebook / pdf reader in a previous answer here, guess it’ll help you decide which to choose:

http://answers.yahoo.com/question/index?qid=20100611015403AA89ueo

Hope this helps.