a 7.85" iPad wouldn't be so much smaller than an iPad 9.7", and way wider than a 7" tablet/e-reader generally with a 16:9 screen.
To visualize sizes better,
this picture can help.
---
The iPod Touch remained unchanged since the Autumn 2010.
Maybe Apple will have a new device to sell next october, at $199, but my guess is it will then simply be an iPod Touch revisited.
I still don't buy the 8" iPad mini rumors. I can better imagine a
3rd category of iOS device, between the iPod Touch and the Ipad.
We'll see
6.75" iProduct or iPad mini with 8GB @ $299 is very reasonable.
I read some irony ... but I will answer and disagree =))
What are the arguments sold for the rumored 7.85" iPad mini? smaller size and more portability (and small price is not evident).
That doesn't work.
To keep compatibility with iPad appps, a mini iPad would be constrained on 2 factors: size and screen ratio. The 7.85" 4:3 screen sure appears as a good candidate.
This diagonal size didn't appear from nowhere: the pixel density of a 1024x768 screen at this size would be the same as the non-retina iPhone/iPod, and then simplifying production.
But while iApps would probably work about ok in most cases at this size, the screen size diminution wouldn't be so important, especially in width: less than 3 cm. Lots of noises for little advantages.
My guess: the 7.85" 4:3 screen was probably for Apple the first candidate they came up to, before the iPad launch.
Easy to produce screens at that pixel density, with their iPhone/iPod line production.
But after tests, they decided the user experience were not so good, and were constrained to get to the bigger size we know now.
Maybe the 5"-6" range at 4:3 would become interesting for a smaller size, but you then completely lose compatibility with iPad apps needing to render elements on screen at a reasonnable size.
Not really a tablet anymore, not really meaningful to call it an iPad anymore, and what usages would it be designed for? is 4:3 the good aspect ratio choice at this size?
Still, for me, Apple lack a product, portable enough and big enough, as described in the second link.
That will probably not be exactly the one in the mockup, but that's the idea. The picture's comment give the directions.
(and i don't think a 3rd kind of iOS device would be a problem for devs, that just would mean new kind of usages, and new apps to build and sell)