I'm thinking maybe 1024x768...except as I type that I realize THAT might not work either as interface elements might not work. And I don't think it's a great idea to have have developers explicitly code for...what would this be? THREE separate interfaces + 4 or 5 separate resolutions?
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The original iPad and the iPad 2 have a screen resolution of 1024x768 already, so in theory if a 7" screen was designed with a higher pixel density than an iPad 2, maintaining the same resolution in a smaller dimension, then everything would work with no extra effort. This is really the only option to avoid the things I mentioned in my previous post. It's shooting for a different pixel density or resolution that brings on the 'fragmentation' of the iPad line I'm worried about.