The edge should under no circumstances be changed. The 1% edge is why just-dice has a market advantage and 2 million BTC wagered.
If he raises it, gamblers will instantly go play at a competitor with 1%. Adjust the max bet if you'd like, but changing the edge would be a terrible business decision.
It would be a change in the edge for bigger bets. No, other sites have a higher max bet. Having the feature with bets with a higher edge will actually encourage gamblers cause they'll be able to bet even more. If they don't want to pay more edge they can just use the lower max bet.