ding ding ding.
THAT's the issue.
That, and the fact that Apple doesn't actually NEED to diversify yet. They still can't make the existing model fast enough.
There's a pace to these things, and while I think there will be a 7" model at some point, there's a LOT of iPads to be sold in the current configuration, particularly having the market all to itself.
Remember we are talking an order of magnitude increase of numbers over any of the Mac lines the same rules still apply but in a very different way. So they If they need additional production capacity then why not have two production lines making two products. Where is Mac lines are about simiplifing options to keep lines as busy as they can, in the iDevice realm the lines are seemingly already busy even over capacity.
That way they can diversify demand so the smaller model steals some of the demand for people who would prefer small but settle for larger as well as taps the market of those who want smaller and aren't prepared to settle. That then opens up capacity for those to tap pent up demand for those that still want the larger model.
Plus you don't have two production teams competing for the same parts which is what is holding back production of the 9incher now. Plus if parts are constrained then switching to an upgraded model with higher res, helps them move away of parts that are in high demand and resolve issues.