I see reading comprehension is an issue here. Lets break this down piece by piece to make it easier for you to understand.
"Commenting on avalanche of tablets heading to market. Just a handful of credible entrants."
Here Jobs clearly introduces that he is talking about the 'credible' high-performance tablets that were actually on or near the market at that time. Note that he is not talking about products that are in development, or in the distant future.
"Almost all use 7" screen, compared to iPad at nearly 10" screen. 7" screen is only 45% as large as iPad's screen."
Clearly Jobs is focused on the deficiencies of SEVEN INCH screens. He says that number over and over. You should be able to grasp this. He has a problem with screens that are "45% as large as the iPad" which isn't remotely like an iPad mini which is much larger.
"Hold an iPad in portrait view and draw a horizontal line halfway down. What's left is a 7" screen...too small."
Again he is obsessed with the failures of SEVEN INCH tablets. He says it again.
"There are clear limits to how close elements can be on the screen before users can't touch accurately."
Quite true. 7" tablets have failed miserably. While they may be worshipped at the Church of Marketshare, one of them has ever been sold at a profit which means consumers don't value them. Many of them, such as those made by Microsoft and BB, have lost their companies BILLIONS. Jobs was 100% correct about the SEVEN INCH market.
"We believe 10-inch screen is minimum necessary."
Now this is the one statement that people like you love to take out of context. You do realize the original iPad itself was 9.7", right? Do you really think Jobs was saying that the original iPad was too small? Or that 9.6" or 9.5" is too small? As he said over and over, he was talking about the market of 2010 where your choices were ~10" or ~7". At no point did he say "I've prototyped an 8" devices and it sucks" nor had he used one from his competitors as they weren't selling any in volume. His main point was to tell the foolish analysts in the crowd that they were dead wrong about the market potential of 7" tablets, and he was right. Taking his comments out of context to mean that Apple would never go even slightly below 10" is ridiculous.