It is it is, a cheap and for the price it isnt all that bad, in fact if it weren't for the fire I wouldn't have bought a xoom or Ipswich.
At this point though the full featured tablets are getting cheaper (android tablets) the kindle isnt as groundbreaking price wise. I got a xoom for example for 100 more with ICS support, quadruple the space, camera, higher resolution screen, full google play (store) support.
Then there is the hp touchpad and blackberry playbook that are dirt cheap with a much more full experience.
Amazon app store very slow to develop, which I think was a mistake to not support google play (android marketplace).
I dont think this is a issue of the 7 inch size not selling its just the fact other android tablets are getting cheaper with more features for just a bit more than the fire.
When the fire was released the only option was $500 tablets so broke a price barrier at that time.
btw, Im not so sure about these articles one week they say the fire is doing great the next week its suffering. I think it is somewhere in between, I think it has its own little market and is doing ok but amazon needs to update it to stay relevant in the segment and do it soon. As said its big benefit (price) is not there anymore.