I think the main problem isn't that they didn't
want to make a bigger high-midrange chip, but that average fab costs per mm² keep rising when comparing similar points of process maturity.
Wouldn't be surprised if a ~210mm² (28nm) Pictairn chip actually cost about as much to make right now as a ~340mm² (40nm) Cypress chip cost back in Oct. 2009 - so launch prices of the corresponding cards end up very similar though the chips are of different size.
That being said, a ~300mm² high-midrange chip @ 28nm should actually become way more financially feasible towards the end of this year. I think AMD is in a rather good position in that respect. The direct successor to GK104 will probably end up somewhere between 350-400mm² - so a 250-300mm² Pitcarin successor has more headroom for relative increase in die size.
The question really is: How far are they willing to go within that range - and what are Nvidia's plans? Slightly over ~250mm² Pitcairn successor vs. slightly under ~400mm² GK104 successor won't really change the current performance gap in any significant way. Slightly under ~300mm² Pitcairn successor vs. slightly bigger than 350mm² Gk104 successor would get really interesting, though.
Given the current circumstances, I'd probably just try to extend the average life cycle of my compute chips, though - and make room for bigger gaming chips every 18-24 months. Tahiti is really good at compute tasks and FireGL cards take a lot of time to validate anyway - so why bother with another compute-heavy chip in 2012?
Going down that BIG COMPUTE - MEDIUM GAMING - BIG GAMING - MEDIUM GAMING - BIG COMPUTE (20nm) - MEDIUM GAMING (20nm) road, a ~250mm² Pictairn successor PLUS a 350mm² gaming-optimized high end chip would be a really nice combo of medium and heavy punches. Next Tahiti-like multi-use chip would then be scheduled to precede BIG Maxwell somewhen in late 2013/early 2014. Wishful thinking?