I'm about to make the dumbest prediction of all time, here goes...
Ok did anyone else notice that this 7.85in screen exactly perfectly fits within the current 9.6in iPad's viewport MINUS the bezel? What if Apple's plan is to keep all on screen elements precisely the same size, but just make an ipad without a bezel? After all, the only reason a bezel is needed is for two handed operation, but a 7.85in iPad is just the right size for holding the thing with one (adult) hand, thus obviating the need for a bezel (kinda like an iPhone). And of course, if need be, the thing could display a virtual black bezel for a kid's hands. It's convenient because it would require no scaling change to iOS's screen elements.
Edit: not that I would necessarily prefer this scenario. What would happen to the physical home button? I like having a single physical button. But it just seems like too much of a coincidence that a 7.85inch panel nearly perfectly fits into the viewport of the current iPad. It seems like the obvious answer is right in front of our face!
Edit 2: and this would perfectly jibe with Steve Jobs's comment that current 7inch tablets are too small. They're too small because they have a bezel, leaving you with a viewport that isn't remarkably larger than a jumbo phone. But a 7.85 inch tablet without a bezel would keep the same screen real estate as the current iPad.