I'm excited that The New York Times wants to experiment with using the new Kindle DX as part of its business model. That shows that they are acknowledging that readers' habits for consuming the news have changed.
They aren't going far enough. They are only acknowledging the physical differences in the way people read news, not the more complex psychological ones. People aren't just reading static, stand alone stories anymore. They rely on links, context, and interactivity.
People aren't eschewing papers because they are, well, made of paper. It's because they can't archive them, share them, and search through them with the ease that they can digital news. Unless the Kindle DX varies greatly from the Kindle 2, forming this kind of partnership is still ignoring that people interact with news differently than they did before. It's all about sharing, bookmarking and linking -- regardless of what physical device you are using.