Does IOS already take up like 5-7gb of space? That doesn't really leave any space left for the user on 8gb of flash. 
The ipad2 is already $399, so they will likely take out the back camera (the quality was crap anyways), and I assume that some of the parts (like the screen, battery, raw materials) will cost less by virtue of being smaller-sized. They were willing to take a small hit on margins with the new ipad to keep to the original price point, so I can see them willing to earn a little less to lower the price to $299?
At this point, even though it may still be more expensive than other tablets, the difference might be so little that most people will not mind shelling out a little extra for that "apple tax".
The ipad2 is already $399, so they will likely take out the back camera (the quality was crap anyways), and I assume that some of the parts (like the screen, battery, raw materials) will cost less by virtue of being smaller-sized. They were willing to take a small hit on margins with the new ipad to keep to the original price point, so I can see them willing to earn a little less to lower the price to $299?
At this point, even though it may still be more expensive than other tablets, the difference might be so little that most people will not mind shelling out a little extra for that "apple tax".