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I think books, magazines and newspapers have different formats because of different content, and I don't ask for magazines or newspapers to come in paperback format...
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But apparently iRex sees one of its main markets in delivering Broadsheets in 12x16cm.
I agree that a lot of pages on the web are ill suited for reading on the iLiad. Not really because of size but because of the slow refresh rate of epaper. Reading a threaded Forums or navigating an online shop is not something I would enjoy doing with an iLiad.
But there are also many pages with content and formatting not fundamentally different from an ebook (think Wikipedia, reference Sites in general). Why should users be forced to make a local copy on their PC and then to transfer onto the iLiad using a memory card if it could be downloaded in a few seconds via WiFi.
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As soon as it becomes multipurpose, the price shoots up (just see the Sony Reader vs. iLiad for that).
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I don’t really see how a small change in the network configuration can shoot up the price. According to this tutorial
http://e-paper.i-merge.net/epapermanual.pdf the iLiad connects to your LAN like any other network component. And as the OS used is based on Linux it should be trivial to expose the iLiad via SAMBA or at least SSH.