Darn, the Kindle DX is still $379. Everything else got a nice price drop. I've been waiting for a hardware/software update to the Kindle DX and a possible price drop for quite a while now, but I'm not sure I'll ever get it at this point.
I've used both the Kindle and Kindle DX for an extended period of time. When a friend offered to buy me one or the other as a housewarming gift, I chose the smaller one. The DX is just too big for its purpose, IMHO. The fact that it is outrageously expensive, relatively speaking, is just another reason to skip it. I love my little Kindle, and even if the DX were similarly priced, I wouldn't choose it.
I'm sure everyone has different tastes...but, I'd recommend trying them both before buying. You might find, like I did, that the regular Kindle is just a better form factor.
Same experience here - bought a DX then stumbled upon a regular kindle a few months later. DX sitting on the shelf these days, untouched (couldn't find a buyer)...
The Kindle DX is a niche device. As of now, Amazon probably just wants to charge as much as they can, as long as it still sells.
With that said, I'm also interested in the DX. The only problem is that I can't justify that price when I can get a TouchPad for the same price (or less).
As a Kindle DX owner, it's all about the form factor and readability.
Back lit screens cause eyestrain for those of us who read quite a bit. With my DX I can read for hours on end in any environment I could read a dead tree version in. And with the battery life measured in page turns, even when reading at a crazy clip I can go more than a week without charging.
Form factor was the other huge sell. If I want the ability to read my collection of technical PDFs without a microscope (or awkward panning) the large size is needed. Even with non-PDFs I like the hardback size font and character count on lines.
The DX is the only game in town to get both of those right.
No one has figured out a way to objectively measure eyestrain so it's a completely personal decision.
As a developer I too spend all day reading and writing text on a screen and I can can tell you that there are so many things that go into what causes me eyestrain personally that I'm sure making any of it objective would be tough.
I have tons of problems with eyestrain when reading black-on-white text for long periods of time, so the kindle works great for me. I'm sure with a sufficiently configurable reading app I could tweak it until I could stand it, but I don't know too many PDF readers that allow you to start messing with background colors and the like.
I'd like to be able to read outside or on the bus next to a window comfortably. I don't really want an iPad since I'd rather have a device optimized for reading documents than watching youtube.
As for Kindle DX vs regular Kindle - I don't have the best eyes so I usually prefer bigger screens. I have a Droid X rather than an iPhone or another Droid because the screen is easier for me to use. I'm also very tall and have large hands. Bigger products are usually more comfortable for me to use.
The DX was launched before the iPad got a grip on the market. They probably keep selling the DX because, even at the price, there are doubtless some people willing to pay, and it probably doesn't cost them much to keep selling it.
There are legitimate reasons to chose the DX over the iPad and other Kindles, too. PDF's is a big reason to chose it over smaller Kindles; the reading experience of e-Ink, battery life and light weight are reasons to chose it over the iPad.