There is not much doubt that a larger Kindle will be announced this Wednesday (http://www.engadget.com/2009/05/04/amazon-press-event-wednesday-may-6th-see-you-and-then-new-kind). By this news alone, one might assume that this device will cost more than the current Kindle 2, which already receives quite a bit of backlash from having a high price.
However, Amazon knows that their price is considered a purchasing barrier. Although I think they've already done a superb job of pricing given that each Kindle includes (currently) unlimited internet access forever, a lower price will surely help sell more.
How can Amazon lower the Kindle's price?
1) Advertising - a larger screen gives more space for ads in addition to content.
2) Subscriptions - Why hasn't a book-of-the-month club offered a subsidized Kindle?
With the New York Times as a partner of this newer Kindle, they have the opportunity to do both, just like they've always done with their print edition.
Personally, I am very comfortable with the size of the current Kindle 2, but wish all my books were e-books on it so that I have access to them at all times (note that I carry an iPhone at all times).
Another rumor is that Kindle will receive support from textbook publishers. If all textbooks needed by students were on this one device, that would make cross campus treks a lot easier!