Interesting to see Apple make a phablet competitor...I don't know that Jobs would have approved. Nevertheless, I think it will probably sell well, if the same market that likes the Notes is drawn to the 5.5 inch iPhone.
On the other hand, the gyro stabilization and higher battery life may appeal to a certain market as well. I could see the size lasting more than one generation, assuming the trend continues toward larger screens.
Personally the lack of waterproof is going to keep me with the Xperia phones for this generation, though if iOS continues on an trend of openness I may jump ship in the next gen or 2. It all depends.