If Apple is building a touch-pad with a 7-inch screen, it will be a remote for the "Apple TV". That doesn't mean it won't be able run all the existing apps, only that the package would be a flat screen TV and this new remote.
The 7.xx iPad will become the "real" iPad transforming the 9.7 iPad into the remote for the "Apple TV" that hasn't been released yet.
The current iPad is already couch potato's friend -- why not make it the TV remote? The 7.xx iPad will be the device you actually get up off your rump and walk out the door with --- a Real Man's (or Woman's) iPad!
Just kidding ... but not really ....