When the iPad was first rumored, I admit I was one of the naysayers. I thought it would flop and just didn't see a market for it. After the iPad 3 was announced, and a basement flood destroyed most of my books, my wife and I each got one and mine has basically become my digital photo album and e-reader. Meanwhile, my kids saved their allowances to buy Kindle Fires. Shortly after they got them, the iPad Mini rumors started.
After checking out the Kindle Fires, a tablet that size would have suited my needs just fine, probably more so than the iPad. However, I am a big advocate of iCloud. All my music, photos, calendars, reminders and books all sync up very nicely. With my kids' Kindle Fires, their apps and books sync nicely to my Amazon account, but they do not have any of their music from their iPods on them. I know there's a way to get music from iTunes to Amazon's music player, but I also know it's not an easy process. They do not have any photos on them either.
So my attitude towards this rumor is much more positive. I am quite happy with my iPad so getting a mini one for myself would be just plain wasteful and unnessecary, but because of the size and ease of syncing up with other media, I could see my kids selling their Kindles and possibly even their iPods, saving up more allowance depending on the price of these Minis and going that route.
I don't see it being as big of a seller as the iPad, but because it's Apple it will be popular enough. I know a handful of people that will get them just because it's a new Apple product.
As for pricing, I would expect it to be more than other similarly sized tablets. Apple's products always cost more, but from my experience, most, not all, other brands' qualities are not nearly as good. If there is a 16gb model, I could see it being priced the same as an iPod Touch or just slightly higher. No matter the price, it'll still sell well.