Actually, there were already a line-up of such 7 inch or close to tablets on the market before even the iPad was announced. See Nokia's line of Maemo Internet tablets (the 700, n800, n810).
I don't really remember any 7 inch tablets prior to iPad. Of course there may as weel not have been any because Apple changed the entire tablet market with iPad. Competing manufacturers could only attempt to not drown. In my opinion, Apple did not choose to avoid 7 inch iPads due to low sales of any other tablets. They just believed and still believe that 9.7 is the sweet spot. Had they put their design talents to the test, they could have delivered a very successful 7 inch iPad.
I really don't think the "retina" display makes all other sub-standard. Quite the contrary, I absolutely despise my friend's SAMOLED+ 800x480 screen. It just looks so good compared to what you find on iPhones, screw the extra pixels.
And yes, my point was the trend was increased pixel counts. Apple followed that trend. Same reason that leads me to believe we might get a screen size bump on the iPhone 5 (not definitive, but a definite chance).
I disagree. Retina is still amazing and one of the best displays around. Other phone makers have since done a good job of improving their displays and trying to catch the iPhone in this regard, but when iP4 came out there was nothing even close.