Michael Arrington of TechCrunch got this scoop of 2008. Apple is planning to launch a large iPod touch in the later half of 2009.
According to Mr. Arrington’s post, "expect a large screen iPod touch device to be released in the Fall of ‘09, with a 7 or 9 inch screen. Prototypes have been seen and handled by one of our sources, and Apple is talking to OEMs in Asia now about mass production."
Apple may like to called it iTablet but it is too early to talk of pricing of the device. But according to Mr. Arrington, since a 32 GB 3,5 inch iPod touch costs $399, he expects the new device to be significantly expensive.
Silicon Alley Insider puts the tag at around $600 to $700 but with more memory, which I think will be close to the actual product.