Hi Mike,
I thought I also quickly chime in. I see your point that on the business side of things PDF annotations would make things more complicated. Still, for me direct annotations in the PDF or at least the possibility to export a PDF with the annotations included would be very useful too.
Like others I am using my iPad to read all journal articles I have to read for my research. The articles are synced via my citation manager between the iPad and my computer, making it easy to always access my annotations and removing the need to travel with folders of printed out articles…
For Chinese articles, I have been using Pleco reader, and it would be great if I could use it to highlight text too. And regardless whether using the Reader for academic articles or to read books - I think it is always good to have a platform independent way to export annotations (should they be implemented). I would not want to invest a lot of time doing annotations that will be "stuck" in a specific software (bad examples for this are Mendeley or Sony Reader).
As a further thought, I am not sure what kind of annotation support other users requested, or what kind of internal database you have in mind. I imagine that both usage types are quite different and do not overlap much: For users who use the Reader with the main purpose of understanding an document it makes sense to have the annotations saved in the document, and the main type of annotation will be highlighting and notes. Users who rather use the Reader to learn Chinese might want to excerpt text and save it in Pleco (if I understand you right). Then, not the document but the language itself is the main object, and other (annotation) tools would be used.