More tx per block = More fees in total.
Not necessarily. If transactions take too long to be included in a block, it will create an incentive to pay higher transaction fees. Right now you can usually get away with paying zero or close to zero transaction fees. Many times (almost) zero is still (almost) zero. Miners can chose to include only the highest paying transactions, so it would be against their interest to include many more, almost free ones, particularly since it would eliminate the incentive to pay higher fees.
Now arguably thats already true today, and miners (/pools) could already refuse more low fee transactions, but it doesnt really matter because there is ample room in the blocks and transaction fees dont account for much anyway. But both those things might change.
The situation is as follows.
If other miners use small blocks, and you mine large ones, then you have a profit. Why? Because people are paying the same high tx fees for all blocks, but you're getting more.
If other miners use large blocks, and you mine small ones, then you have a loss. Why? Because people are paying the same low tx fees for all blocks, but you're getting less.
Eventually, these two processes will force miners to mine small blocks. That is unless either
all or
all but an insignificant minority of miners agree to mine small blocks, which is unlikely.
Think of it akin to a baking industry. If all bakers sell at high prices, then they may collectively and individually be better off. But as soon as one baker lowers their prices, others will be forced to follow or be individually worse off.
