I can understand the push for a more premium (and thus expensive) phone. But it is somewhat disappointing compared to the great value previous iterations offered.
About the size: I'm sure there are many many people who would be just fine with such a big phone. The popularity of the Note and the iPhone 6 Plus, like you pointed out, is testament to that. But does Samsung sell more Galaxy Note's that Galaxy S's? And will Apple sell more iPhone 6 Plus's than iPhone 6 devices?
The smaller phones (4.5"-5") is still way more popular from what I can tell, so this move from Google seems bizarre. I have not heard one convincing reason why they would make such a decision.