Yes mini has a smaller form factor, but you do realize that it has internals from two years ago, and the screen resolution of the original iPad, right? This was done of course for battery life, engineering, etc... but also to keep the price down.
I'm so utterly aware of what a few negative nellies think of the mini, it's sickening actually.
What Apple decided to do (brilliantly) with the mini is maximise its main feature, the feature which differentiates it from its big brother: the form factor. If they'd put a retina display in it, if they'd put a faster processor in it, if, if, if (pick another component to disparage) the form factor wouldn't be as amazing as it is, and the product wouldn't be as amazing as it is. The fact those parts they chose cost less, well that's a good thing and no they probably couldn't have made more expensive parts work (due to product and pricing strategy which play a part in product management), but to get back to what the main feature of the product is (and my point), it's all about the form factor, and if they do this with a phone, I'm intrigued to say the least.