No! I couldn't afford to buy the cover for it.
Since you say you still want it to fit in your jacket pocket, I assume you mean a 7" screen as opposed to an all around larger Kindle? They could probably do this by sacrificing the keyboard but I would think they would need to use heavier (??), sturdier plastic in order to support and give more "flex protection" to the larger screen.
Not having used an eReader with a larger screen, I am quite comfortable with the current Kindle 3 form-factor. Who knows though. For example, since I really like my 17" MacBook Pro notebook screen, I find the screen real estate on a netbook much too small so I guess it all depends upon what you are used to!
Holly