"The highlighting is saved to an annotation file that marks the beginning and ending characters of each highlight. It may be difficult to extract the highlights, but someone here could possibly be talked into figuring out how to do it."
That is interesting. What is the filename and how does the format look like? This must be doable atleast with simpler formats.
Regarding tablets and highlighting, yes, they certainly can do that. I have been using a UMPC (Samsung Q1 Ultra) for long time to do that. There are commercial and free software (I have used for windows/multi-OS "jarnal" and for linux "xournal") that let you do such work. Some are more complex and capable than others. However, as was pointed out earlier, they tend to be bulkier, more energy consuming and harder to the eyes. They tend to be more expensive and I think their capabilities in general are an overkill for this purpose.
I was given a PRS 700 as a gift so I can read/annotate pdf files along with ebooks. It is unfortunate that the annotations do not appear to be exportable so far. It makes it quite useless for me.