Why didn't they call the iPad an iPod Touch? You can't put everything into the same product category for shits and giggles and expect it to succeed. The 5-7" 3:2 device is much closer to the iPod category than the iPad. It would help prop up the iPod's dropping sales and be seen as a great alternative to whatever Sony and Nintendo plan to make in the handheld console market. It would fit in a purse, something an iPad can't do not should be able to do. Bottom line: you add a flagship device to a struggling product category instead of adding an entry level model to a thriving product category.
yes it was iPod size. but otherwise it was pure marketing. tablets were still iffy, not good for an ID. Apple saw the end of the iPod era coming and knew it needed to segue those customers to iOS. very smart. wish they had capitalized the T tho.