But then again one of the weaknesses in the Android tablet-market has been that there was a lack of tablet-specific software.In the Android space with the Galaxy Tab 7' and the 10.1" it works the same
If the apps are developed with different screen-sizes in mind it shouldn't present a problem, so future apps would work. But then again, what would be the point of the 10" iPad if all apps were created to work just fine with a 7" device?
If Apple are to release a smaller iPad I think they will have to define it as a third type of device. They would likely have to present the device a few months prior to release, to allow developers to prepare their apps for the new baby. As mentioned earlier I would much rather see Apple go in the other direction and release a substantially bigger iPad as a third type of device as I have a hard time seeing the benefits of a device between the current iPad and iPhone form-factors...