The Sony directly supports PDF, but as you noted you need to reformat the pages to the screen size of the Reader. Straight text is pretty easy to do, but highly formatted pages (e.g. technical papers) just don't convert too well. The Reader does not support encrypted PDFs (e.g. purchased books with DRM). The 505 may eventually support the new Adobe Digital Editions format, which could make a larger pool of paid content availabe.
Highly formatted PDF's that are already in a smaller size (like product manuals for cameras, etc.) look very nice on the Reader.
RTF files are also directly supported and work great; that's what I generally use for text files, particularly public domain books.
That said,
www.manybooks.org now has the option to download PD selections in .LRF (the Sony specific format) if you want. Baen books (an SF publishing house) is also offering .LRF as well now. I bought most of my books from Baen as HTML and converted them to RTF in Word; haven't tried their .LRF yet so I can't comment on how they look.
Sounds like you've already found
www.mobileread.com - a good resource for ebook support.
A significant consideration about the Sony is that if you want current, paid content beyond that offered by specialty houses like Baen, you're stuck with the Sony book store. Browse around and make sure you like it. As noted above you may find the Kindle / Mobipocket format better suited to authors you like.
I've got the PRS500 and really like it. Great travel companion for pleasure reading and very handy for keeping all my gadget manuals with me.
Regards,
Bob