Amazon indeed announces a Kindle with a larger screen: the Kindle DX. Available for pre-order now for $490, release date is sometime this summer.
Update: During the press event announcing the new device, Jeff Bezos said that for books that have Kindle editions, the Kindle version accounts for 35% of the sales. 35%!! Also, Merlin Mann would like you to know that if you buy a Kindle through the above link (this link right here, if you're confused), I get a little money from Amazon. Although I'm not even sure how Merlin can tell what's going on way down here from so far up on his horse.