That's true but there is still a significant difference, and perhaps they could be categorised together as similar devices, perhaps with only one model each (128GB) to keep costs down, with no option for cellular on either.That sounds ideal to me.
Apple used to market the iPod Touch as a gaming multimedia device. It seems a low-cost non-cellular 5.5" iOS device would be pretty good for that.
Then again, the iPad Mini already sort of hits that criteria, and the last rumor was that it was being discontinued.