It's a market that Apple has officially denied interest in.
Is it really a market they've denied interest in? Steve Jobs said at one point, "But we'll wait and see how that nascent category evolves, and we have got some pretty interesting ideas if it does evolve". That sounds to me like an admission of interest, but not something they're going to rush into.
I think that they will enter the netbook market, but probably for around $500 instead of the $250-$350 range like the current breed of netbooks... The "really big ipod touch" idea sounds pretty likely, though it would have to have some neat features for me to spend the extra money... like running multiple tasks at the same time, and cut and paste... you know, real innovations... heh I keed, I keed...