Larger tablets do exist, see for example
Samsung's 11.6" Windows Slate, but the weight is the main issue, with them clocking in at about a kg. It will be interesting to see how svelte they can make their
rumoured 11.8" Android tablet.
Things could have gone differently if the
12" JooJoo tablet hadn't turned out to be a dud (released a week before the original iPad).
While digging into this, I've found that
the WeTab is still around, another 11.6" tablet, but this time pushing a Meego derivative.
I agree it's an area where Apple could produce something startling, but would be further moving away from Steve Jobs' vision of paring the company down to a minimum of devices, with clear differentiation.
Graham