I'd like to add my thoughts on the smaller iPad (again).
I do think the kindle fire's success is more of a price thing than a size think. I'm a small guy, 118 lbs 5'8" and I have no problems taking an iPad on a buss, or carrying it everywhere I go. So I don't see a need for a smaller device or how it is better for a large enough market segment. A parable would be, how for most normal people, low fat low calorie is the best diet. For someone like me who NEEDS as many calories as possible, the market doesn't revile around me. Why? because I am not most people.
To some degree marketing is utilitarianism, "the greatest good to the greatest number." In that light I don't see Apple changing their screen sizes much if at all.
Apple is so successful by targeting a broad market segment, not so much catering to a niche. Lots of other companies do that.
I've seen some comments from people who think the iPad is not a magical, revolutionary device. Thats fine, everyone has their own taste. I and tens of millions of other people who are 'not' brainwashed fanboys agree.
I liked Drunken Master's krihnamrta quote. Krishnamrta was wise in many ways, and has an interesting life-story. I've seen many case where the 'right' thing wasn't a choice, so choice just for the sake of choice isn't always the best, and even if it is, it has never been part of Apple's brand. The truth is, if you don't like that about Apple, you don't buy their products.
Despite being an Apple devotee, I don't want them to be the only game in town. everyone has different values, and competition helps keep everyone on their toes. As I told someone in IRC, I am brand loyal to Apple because I find their products the best experience overall. IF they didn't make products I like, then I wouldn't buy them,
Part of the reason Apple may seem draconian to observers is that unlike most companies, they embrace Job's OCD level of perfection. Perfection is relative, but when you seek making something perfect as you can, you only make a decision when it is perfect in your eyes. Thus I don't see a smaller iPad, since for most people doing most things, ~10" is the perfect size.
To say, Anyone who is a developer and can't support multiple resolutions shouldn't be one, is about the most moronic thing I have seen. I AM a developer and I know many other developers. A lot of development is centered around many other things besides the GUI. Less variance in the target platform means a developer can focus one what their app is meant to do, and not worry as much about getting it to look good on many resolutions.