I did download the update (wasn't paying attention)... and I am unable to read my books. Upon launching a book within iBooks, I am presented with the following message "There is a problem with the configuration of your iPhone. Please restore with iTunes and reinstall iBooks."
I honestly don't see what Apple is trying accomplish with a move like this. I can imagine some people going and downloading plain PDF versions of such books from torrent/other sites if they can't use what they purchase, or at least the very news of it may sway some people from buying through Apple in the first place. Brilliant. Just brilliant. Almost as much as having DRM on books in the first place...