Yeah. Someone came up with a compelling case
for a 7.85" (I think) iPad.
Apparently, the old iPhone screen technology would give a 7.85" iPad the same 1024x768 resolution as the iPad and iPad 2.
Still, the screen would be a little over half the size of the iPad's, and that will definitely cause problems: some text will be too small to read, and it's already fiddly to tap the right thing in some iPad apps, let alone at 25% of the size.