One of these Tag readers came into our possesion as well, and frankly, it doesn't seem that fun, but it's not evil by any means. DS1 (age 5) will play with it occasionally, and really really likes one book about Star Wars (but then, anything Star Wars goes over big here).
It's nice for a sort of strange situation we've found ourselves in this year - DS is in public kindergarten in the afternoon, but when the district calls a half-day (for holidays, teacher training, whatnot) both the morning and afternoon classes go in for the morning session. One class is in the regular class with the teacher, and the other is in the library with a sub (they switch off who goes where). When his class is in the library, they can do the work that they'd normally do in their classroom, but they don't have any of the toys for centers/free play -- so they're allowed to bring in one 'quiet' toy from home. DS1 has brought his Tag reader and books, and it was a hit and had his classmates asking to borrow it as well.
That said -- I wouldn't pay a lot of money for it, I've gotten a couple of extra books for him with a coupon but it's not the Best Toy Ever. On the other hand, it hasn't kept him from reading lots of other books on his own, or having books read to him by mom or dad. There are lots of hours in the day for all kinds of activities (esp. when you wake up at 6 and refuse to go to bed till after 8!