Boy, you're just swimming with rank generalizations, here. You need to take some of your own advice and just quit while you're behind.
First off, you need to realize that 3.5 million unit sales is absolutely ZIP on a world scale. There's 330 million people in the US, 501 million people in the EU, 127 million people in Japan, 33 million people in Canada, 25 million people in Australia, and 48 million people in South Korea. That covers the big markets for tech in the world and leaves an absolutely staggering number of people who still don't have iPads. Even if only 1 person in 10 in those countries is actually a potential iPad customer, that still leaves roughly, oh, 99% of the potential customers without an iPad in their hands.
Don't for a second think that you speak for all those people when you state that no one wants a 7" model. You don't know jack about potential iPad customers one state over, let alone across the world in a totally different culture and city. Ever been to the Akihabara technology district in Toyko? The 10" iPad is a total behemoth in that world of miniaturized cell phones, cameras and notebooks. Just in Japan alone Apple might easily get enough sales of a 7" model alone to justify production. Add South Korea to the mix and sales of a 7" model over there might easily pass the 10" model in the good old US of A. Texans aren't the only ones with dollars to spend and opinions on tablet PCs, bucko.