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I like the idea of a 10 inch PlayBook, but don't think I would really use it unless I was using a app that required the full real estate. Music creation apps really benefit from the larger screen.
Yeah, having a 10 inch form factor would appeal to more people.
I'd say RIM should have both form factors, a 10 inch and the current 7 inch. (I personally prefer the 7 inch but have nothing against the 10 inch).
The screen size should be the only differentiation. Battery capacity would obviously have to be a bit higher on the 10 inch, that's a given but in terms of specs it should be identical. Here's a thought as well, make it so that the screen resolution is the same PPI density. Mind you this would mean 2 different screen resolutions but I'm envisioning the screen sizes to be scalable. This would mean that no matter if you got the 7 inch or 10 inch, the hardware would be pretty much the same, you wouldn't be missing out on any features.
This would be a first for the modern tablet industry and it could really be a fact that can hit home to a lot of people, 7 Inches or 10 inches, same great functionality. With the proper marketing behind it I really think this idea of 2 screen size choices can fly with a lot of people.