Kno's single-tablet pricing isn't too far from the price of the equivalent iPad, which has become the de facto industry benchmark. However, the Kno readers have a very different set of use cases than the iPad. Kno's devices are designed to provide as close of an electronic substitute as possible for the experience of using printed textbooks, so they have big screens that can fit most textbooks in current use on the screen at full scale. Students can take notes and highlight with a stylus, or use their fingers. They're not general-purpose devices like the iPad or notebook computers.
Kno claims that their rental program will cover the cost of their single-screen tablet in three semesters. However, the question is whether students want an expensive dedicated eBook reader at all, or if they can live with the smaller screen of the iPad and similar devices. I think that most students will go with the iPad. They'll get a ligher, easier-to-carry device, an enormous selection of apps and a choice of eBook vendors, rather than being locked into Kno.
Kno started developing their eBook reader well before the iPad was announced. If they had waited until the iPad was available, I suspect that they would have chosen to support the iPad and other tablets rather than building their own. If Kno's eBook readers don't get market traction quickly, they may be forced to alter their strategy and support other devices.
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