Bigger blocks would - for one - make these kinds of attacks more expensive. This stress test is only slightly effecting others because OP is burning coins as fees and miners are - as its intended - greedy. If the max blocksize is 2 MB the same attack would have needed 40 BTC instead of 20 BTC[1] to have the same effect.
Why do you assume the price of a transaction the txfee will stay the same as the supply of transaction space increases? This contradicts
the law of supply and demand. The price should go down when the supply increases and normal demand stays the same, and the cost of the attack against 2 MB blocks will be exactly the same as the cost of an attack against 1 MB blocks.
Miners can/will make sure of this. If you send 0 fee transation you can see this. Even if blocks are less then full it will take long time to get conformation. Even low fee takes much longer...
EDIT: And we can make a structure that only 1MB is for low fees. Like 50k that is for hi priority transactions... The rest 19MB or 7MB hi fees... Problem solved...