I don't think I would want this device for $500, let alone what Apple is asking. What is the appeal? There are a few screen scenarios that make sense for my life: (1) Multiple displays at desk to work; (2) TV + couch; (3) laptop + lap or surface; (4) phone (anywhere). I'm never in need of a tablet. If I needed that screen real estate, I'd be reaching for my laptop.
Many people (possibly a majority) use their phone for most of their computing, and perhaps a tablet to stream movies/tv. They use a laptop or desktop for work only, and see those as frustrating and clunky devices. There could be a lot of demand for "phone, but with a tablet screen when I want to watch Netflix" from the segment of the population that has zero overlap with people commenting on a tech forum.