I'm a student, and very appreciative of the student discount.
I also understand the need for O'Reilly to make a profit, or, since I suspect that conferences don't really generate direct profit (trust me, I know how much conferences cost), not lose too much money so we can keep relying on O'Reilly's books, site, and conferences for good information.
What about offering a limited number of scholarships to people who qualify in terms of being a student, IT worker, or instructor ? The scholarships would admit the awardee to the entire conference, but not cover anything else.
Apple's World Wide Develper Conference has has a scholarship program for students enrolled in the Apple developer student program for some years. The fee for student memberships to the developer program is much reduced, and student members can apply for a WWDC a scholarship to WWDC by responding to some well chosen questions and providing proof of full time student status.
I've gone twice to WWDC on a student scholarship, and it was not only well worth my time, it benefitted my colleagues and, I think, Apple.
O'Reilly could offer scholarships to part time instructors, or staff, which would make it easier for them to attend and would in effect make them ambassadors about the value of the conference, perhaps making it more likely that their instutions would sponsor them in the future. It would also be another way for O'Reilly to give back to the community, something O'Reilly is known for.
I am teaching now, and thus couldn't go to the Emerging Tech conference, I'm already planning on how I might be able to make it to the O'Reilly Mac OS X conference. I'm grateful for the student discount O'Reilly often offers, but I'd be even happier to have a scholarship. I'd even blog the conference <g>.