But don't the battery issues and heat problems also happen to the iPad 3 and 4?. Why would those things pertain only to the mini if it had the retina display?
Who said those things only pertain to the mini?
That's the whole point. If you put an retina display on this device, presumably with a 2048x1539 screen (introducing yet a new resolution means additional work for developers, so history suggests this won't happen), then you need a larger battery to drive it. And you need an a6 processor to power it. Thus, it's thermal characteristics shift toward those of the iPad 3/4. Might even be worse since the surface area is smaller. The device would take on a different character. The smaller but denser screen (326ppi) , the A6x processor, and the larger battery all drive the cost up and in exchange the device becomes heavier with worse thermal characteristics. Yeah, it would have the specs that everyone loves, but at a price. And we know phones have that kind of ppi, but not all this surface area (well, the nexus 10 has 300ppi, but it gets stomped by the iPad 4 -- and the screen is not as good as what Apple delivers). What are yields like at that size?
Staying with the A5 and a 1024x768 display results in a huge battery life and so far, a cool device. I will do some testing to see how much it heats up. So far, I haven't noticed any warming, but I can't say I've driven it hard except for testing some games.