Seriously, I can't see apple producing a tablet at 10" or less, when for one, people complain about the screen size of the Mac Pro 13" being to small.
Apple already produces a tablet with a smaller screen; and it outsells all MacBook Pros by a huge ratio. It's called an iPod Touch.
But it's screen is smaller than a paperback book, which is usually the smallest book that millions of people carry and read every day. A device the size of a paperback or hardcover would be huge in comparison to the current Touch/iPhone.
Just the opposite of too small.