So,
by "more iPhone like", I am taking that to mean that it will have a more uniform thickness, and rectangular edges, without the radius taper.
For a smaller footprint device, I can see why they might want more real-estate in interior volume. Hopefully it will also allow for the iPhone 4's cameras, and full cadre of sensors.
I also would wonder, like others have mentioned, if the 9.5 inch form factor would give rise to something closer to an 11" diagonal screen, like the larger netbooks, and smaller full laptops, but still in iPad's tablet format, and iOS environment.
I was thinking the other day... in a year or two, I wonder if we'll be seeing iPads with cameras being used as bar-code readers (or even optical recognition of a product directly), and a magnetic/RFID attachment, in some shops, instead of cash registers. Maybe along with a base-docking-station cash-drawer and receipt printer (for those who insist on paper, rather than receiving a receipt by e-mail or text message, or something.) the docking station could also serve as the software sync, and charging, if not induction charged by then.
An iPad software sync server could handle data management, and even multiple users. Swipe a magnetic card, or rfid tag through the card reader, and the iPad is loaded with a profile for a specific employee, and tracks their transactions separately from other employees.
I could see where there might be a use for extremely portable 7" form factor, as well as other desire for larger 9.5-12" diagonal screen real-estate, with perhaps slightly less ultimate size efficiency.