Apple started with simple media players, and the Touch is still in that family. Yes it does wifi and all the associated trappings, but making it larger doesn't leave it in the "pocket media player" realm.
What I might like is a 6" touchscreen wifi PC that I could use anywhere in my house for web access/email/etc., and possibly remote control of my home entertainment gear. Put the wifi related parts of the Touch into it, and leave out the music/photos/videos. In my house I have better equipment for those things.