I understand the logic, but respectfully disagree. These are different product lines. One fits in your pocket, the other one doesn't. As others have mentioned, more work is required to get essentially the same components to fit in a smaller space. One has a retina display (the iPod) the other won't (the iPad Mini). It's comparing apples and oranges, and there's just as much reason to believe that Apple will low-ball the price to compete with the Kindle Fire.
Many disagree with me (which I understand, it's just my personal opinion), but I believe Apple will price the entry-level iPad Mini at $199 for a simple reason - they want to compete with the sub-$200 Kindle Fire and draw new customers into their ecosystem. They can sell models with increased storage and LTE support for $300-$600 and bank on those for a higher profit margin, but the $199 model (again, my personal opinion) would be geared towards introducing new customers into the Apple community with a lower profit margin.
For those new customers, the iPad Mini might be their only Apple product. They may own an Android phone and a Windows PC. But Apple is hoping that once they get their hands on an iPad and start buying apps, music, and books through iTunes and the App Store, that their next phone will be an iPhone, and maybe their next computer will be a Mac.
Amazon uses this same logic with the pricing of their Kindles. They don't make bank on the tablets, they make bank on the content. Apple doesn't have to do this across the board with their products, but it would be smart to do it at the entry level to draw in new users.
My 2 bits.
