In August 2003, I bought myself a Palm Zire PDA to read the texts I had helped produce, and some of the classics. Unfortunately, my first search on Google for free ebooks for the Palm Pilot was rather unsuccessful. All the links I found led to publishers of commercial etexts who used some freebies as teasers. Project Gutenberg does provide gratis ebooks, but not in a Palm native format.
The sites mentioned above produce etexts that can immediately be installed on your Palm (clicking a downloaded file is often enough to put it in the queue for the next PC-Palm synchronization).
I was mainly looking for PDBs of the classics out of laziness: I did not want to have to convert existing files to something the Palm understands. However, sometimes that is the only option. The Viewers listed below have web pages that tend to link to the tools you need to create etexts for them.
A year ago, the vast number of Project Gutenberg etexts were only available in its renowned 'plain vanilla text' format. Since then, Project Gutenberg has started producing many more formats, especially HTML and MP3. I find Plucker a usable format to convert HTML files into, although it unfortunately does not have a way to specify how large you want your chunks of HTML. The original Zire is rather slow, and sometimes it takes half a minute before a webpage is displayed on your Palm.
Plucker (for HTML source files), Weasel, Cspotrun.
Currently, my personal favourite is Weasel, mostly for two reasons: it uses zLib compression, and it lets you annotate books, which is handy if you want to report errors to Project Gutenberg.
Of course, it is likely that you have different requirements. The other readers tend to be more feature packed (I use Plucker for its syndication feature, and to read poetry for instance). There are many more readers than I mentioned here, but the ones listed here are recommended by many people on the net. All three are free downloads, as far as I know.
The above was written from the viewpoint of somebody who is happy with reading century old books. However, there are a couple of sites that collect free modern ebooks. Project Gutenberg has some of those books, but mostly limits itself to public domain works (it has a no-vanity-press acceptance policy).
The Assayer is an online review site for free books, and seems to concentrate only on modern works. Its Links section points to other useful sites.
Free Ebooks.net has a large collection of free ebooks, in Microsoft Reader and Acrobat eBook Reader formats.
Finally, Wikibooks collaboratively creates text books for use in schools, currently in over 30 languages. Although all works there will probably be works in progress indefinitely, they may provide the basis for your own class-room materials. I believe there may be other such efforts out there (as teachers have been creating their own class-room materials for ages).