I thought about that too, and it occurs to me that the haptic feedback rumour that surfaced just prior to the iPad 3 launch would be a superb differentiator for this device, particularly if it were promoted as a gaming device/TV remote.
That's an interesting idea. I still don't know if a $249-299 remote will fly but if Apple can find some ways to do a better integration on the device with the Apple TV, etc, that could be a great marketing point.
Also isn't Apple supposed to be working hard on maps? Perhaps it might have some future as GPS navigation device or something...
I'm not sure if developers will like having another screen size to support though. :\
I'm not convinced that the 7" size is really enormously more portable than the 10". I've held a Playbook and while I probably could fit it in some of my coat pockets I think it would be pretty awkward given it's size and rigidity. ... This isn't to say that I think a smaller iPad is non-starter. If the 7.85" size meant that it could be made lighter and more cheaply than I think it could find it's place.
Pretty much how I feel about the Playbook. The size is still too big to be truly portable. On the other hand, one place I could think it works better is on subway and bus. In crowded seats during commutes, the 7 inch devices do come pretty handy and less awkward. IMHO this partly explains why these 7" devices and the Galaxy Note saw better success in Korea where the subway usage is probably more important than in North America.