I just don't like the possibility of being locked out of the own device.
I also like how the publicly developed software improves over time. I haven't seen any improvements for my Kindle (most likely same model as yours, but gsm) from Amazon.
Can they lock you out of physical usage of the Kindle, like a remote kill-switch of sorts? Scary, if true..
Fair point on the software improvement though -- you might want to look into Duokan, it seems to be really popular and adds native ePub support: http://www.mobileread.com/forums/showthread.php?t=150175 (bonus if you like some aspects of the original OS: there's a tool that let's you switch between the two firmwares.)
Can they lock you out of physical usage of the Kindle, like a remote kill-switch of sorts? Scary, if true..
I don't think they can lock you out of the device. The only thing I've ever heard of them doing (and what they did in this case) is remote deletion of books you've purchased from them.