The idea of a larger, newspaper-oriented reader (including a Kindle) has been floated before, most publicly by Hearst, who proposed a 8.5x11-inch reader in February. This report revisits that plan, pegging Plastic Logic as the manufacturer of the device. But that stuff is decidedly future tense ("by the end of the year"), and digital access to Hearst titles is only exciting if you live in one of their papers' markets. (You probably don't.)
Amazon's device would have access to the same wide range of publications as the current Kindle, and likely a few more, but a larger screen could mean content will be formatted differently. Hilariously, the Times reports that they are "expected to be involved in the introduction of the device", but couldn't extract a comment (revealing!) from anyone in their cubicle farm who is allegedly involved in the project. But this naturally Times-centric report kind of dilutes the significant of such a device: Amazon will likely carry titles from a vast number of news providers, and if the E ink experience becomes enough like newspaper reading—in term of news choice as well as literal usability—then this product could represent the newspaper and magazine industries' first financially viable step away from dead trees.
As sanguine as newspaper folks might be, magazine publishers are, predictably, a little less optimistic. Conde Nast's editorial director said, "I don't think we would be anywhere near as excited about anything in black and white as we would about high-definition color", hinting that even a mondo-Kindle wouldn't be a game-changer for their richly visual magazine stable.
The NYT report doesn't mention the most obvious possible fault with these plans: despite the fact that a larger screen would be better suited to displaying newspaper content, it might make the device kind of impractical. The current Kindle is small enough to chuck into a bag or briefcase, and carrying one around isn't much more of a burden than toting a weekday newspaper or single magazine. Using a larger reader, on the other hand, would be more akin to carrying a clipboard than an iPhone—fine when you're reading, but a pain in the ass when you've got to leave the subway.