I think they will definitely reduce the bezel size, but I think there still will be some bezel and definitely a home button. The latest rumors have said "similar chassis" to the 9.7, walking back earlier rumors saying that it would be the exact same chassis. Macrumors also posted a picture of a 10.5 inch piece of paper on top of the 9.7 iPad and small bezels remain with room for a home button and camera.
EDIT: Here's that picture. Bezels do remain with the screen size and the current 9.7 inch chassis. Looks like enough for home button and camera.