There isn't a one size fits all. There is the ipod touch, which is essentially a 3.5 inch ipad. Or the ipad is a 9.7 inch ipod touch. Either way you slice it, there is a device for those who want to carry it in their pockets. And there's a device for those who want the larger real estate size. What category would you put a 7 inch pad in? It's too close to the size of the current ipad, and you're losing screen real estate, but not really gaining much in terms of portability, as it's no more likely to fit in your pocket than the current ipad.
Having compared a Galaxy Tab side by side an iPad it's not really "too close" to the size of the current iPad: it's about half the size. You can almost fit two GTabs, vertically, on top of an iPad, horizontally.
Yet at the same time, the 7" screen is still FOUR times larger than the iPod Touch's and iPhone's screens.
Now as for portability, yes the 7" is a little more portable but certainly not in the "easily carry anywhere" category. I see many reviews saying how the GTab is nice because it fits in a purse whereas an iPad won't. Well that is all well and good but half the population doesn't carry purses.
Still, there is something that attracts me to the 7" size. Many times my iPhone and iPad are both readily handy and I choose to use the iPhone because it is just easier to fire off a quick email with one hand. My iPad often feels a bit larger and unwieldy. Not terribly so, but I do notice the weight.
Other times I use my iPhone--usually after using the iPad for a while--and think, dang this screen is tiny.
It could very well be that a 7" size tablet is "just right" for many people. For me it just might be "yet another"" sized device I would want around. lol
Michael