Why?
No way an iPad Mini will cost less than an iPod Touch (5th Gen).
You could be right, and you could be wrong. I am super anxious to find out though.
I personally do not think the price will have anything to do with the iPod Touch price (respectfully). Here is my thoughts:
1 - We already know that Apple considers adding 16 GB of storage to a product to be worth an extra $100 (See iPad and iPhone 16 GB to 32 GB)...
2 - They are different items, the iPod touch is a "smart" MP3 player, not a tablet. If I wanted an iPod Touch, I certainly wouldn't want an iPad Mini instead. While the mini may be more portable than the 9.7" iPad, but it won't fit in my pocket or be good for exercising like the iPod Touch IMO
3 - The Kindle Fire and Nexus 7 have an 8 GB version, so there is a possibility we will see an 8 GB iPad. Apple would know whether they could make that decision based off of how many 8 GB iPhone's they are able to sell. I know a lot of people who do not have any music/videos on their iPhone or iPad... Only apps and photos they took.
4 - Perhaps they will take a slightly lower profit margin versus some other products. They certainly should not have to make much up profit do to R&D.
I know one thing, I will most likely be buying one for my Girlfriend for Christmas

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I can not understand why anyone would buy the touch these days (just get the phone)
A kid who doesn't get a smart phone... Or someone on T-Mobile... Or someone who only uses a business phone and has no choice which model they get... Parents want something for their kids to entertain them...
Some quick ones off of the top of my head that could be in the market
I agree to an extent because I personally do not see the value of an iPod Touch ... However, I do know there is still a market for it.