What I am thinking a killer app for a larger iPhone/Tablet would be is as a peripheral device for your primary computer...
I like the idea. And I hope you're right.
But for my money the killer app is: Bonjour. The ability of these devices to detect one aynother and create their own little network. Seemlessly, without hassle or servers. Imagine a writing pad that really allows you to interact with everybody else in the room - or on the other side of the world if you so wish.
I think soon schoolchildren at most schools will be required to have one of these. No more paper writing pads, no more printed textbooks, no more loose sheets flying around in bags or classrooms, getting lost.
Picture a scene from a classroom:
"Good morning, class. Here's the scene from 'Romeo and Juliet' we're going to work on today." [with a flick of the wrist the teacher passes a copy to each student] "Tom, you'll read the part of Romeo. Lisa, you'll be Juliet." [sends them a special copy with their lines highlighted] "We'll start here." [points to a line, which is imediately marked in every student's copy]
[after reading] "Now I'd like you to sketch out the scene as you would direct it on the stage. Where is your balcony? Where does Romeo hide etc? When you're done, hand it in by dropping the paper on my icon"
And I believe that it won't be just schools that find good use for this. Every meeting I've ever been to could have been improved and streamlined, made more creative if people had had such an iPad.
Sure, you could do all that with laptops, but you don't quickly sketch down ideas with a laptop, you don't doodle in the margins of a brief. And I always feel that in meetings where many people have laptops with their screens folded up you tend not to work with each other, you don't look onto each other's screen or share papers on the fly. It's like a game of Poker. This device will eliminate the laptop from all interactive work environments. It could be the first successful stab at the paperless office.