I would jack up the price. I'd do this even if I also started another blog or site.
The reason is simple: over the long haul, I figure advertisers discover which web sites really do deliver traffic or valuable link juice. If my space is being snapped up, that means that specific real estate is valuable. There is no reason to sell it cut rate.
Starting another blog or site is time consuming and might work. It would also take time away from maintaining the quality of the "in demand" site. So, even if I started another one, I would jack up the price on the currently valuable one.