Unlike many manufacturers like Samsung, Nokia, Motorola, LG which produce all kinds of crazy products for what they perceive as providing infinite no of solutions to the consumers with wildly different form factors seemingly without any concept of self-cannibalization, Apple has followed a strict rule regarding product differentiation. Too strict, I say. This will boost their margin tremendously without having to expand their market share significantly. But I feel that a 7" tablet can be as successful as the 9.7". When I first bought iPod Touch, I can't get over the fact you can have "internet in your hand." Full internet browsing is incredibly swift & intuitive. And that swiping action is just incredibly addictive. I knew then what I wanted, and still do today: a larger screen iPod Touch/iPhone. The iPad seems to be the closest thing to a solution but it is way too bulky for it to be a portable device& it weighs a bit too much after more than 15 minutes of handling it. Folks in medical services, visual artists, photographers will find the large screen very helpful with their tasks (that youtube demo for iPad app called SketchBook Pro is jaw-dropping -do a search for it), for the 90% of casual media consumers, they wish for a lighter, smaller iPad - with SD card reader please.
PS - On another completely different topic: they could reduce the width of the bezel around the screen. Thinner is sexier. Why can't they just take the screen of the current 13" MacBook Pro, attach the battery+electronics in the back, and call it iPad?