I've been trying out Google Reader for the last couple of weeks. I opened my browser tonight and was pleasantly surprised by a new version. It's not just an update, it's a whole new app.
Instead of categories, feeds are now arranged in folders much like other RSS readers. As you scroll down your list of unread items, they are automatically marked as read. I think the keyboard shortcuts have been expanded, too.
Be sure to check out the "Goodies" under account settings. You can add book marks that allow you to navigate subscriptions, and to subscribe to new feeds without leaving a site.
The only bummer is that it reset the status on all my feeds, so I had to mark a lot of items as read that I had already seen. Not a very big deal, since you can click on folder and mark all items as read.