I also vote that the extra money to avoid ads isn't worth it. You don't see them when you read. They show up as screen saver photos when your Kindle is off and as a small strip on the bottom when you browse your list of books. (ETA: That's how it works with e-ink Kindles. I don't know how things differ with the Fire.)
Warranty depends on you, I'd say. I've heard that Amazon is pretty good about giving people deals on a new Kindle or sometimes even replacing it if one breaks. I didn't buy the warranty. I usually only buy them on cameras and kids' electronics, since those take more abuse in my house. I have the Touch, but if I'd been buying a Fire for my kids to share with me I would have considered a warranty.