AllThingsD has dug up an old quote from Steve Jobs regarding Apple selling an 7-inch iPad:

“’The reason we [won’t] make a 7-inch tablet isn’t because we don’t want to hit [a lower] price point,’ Jobs said. ‘It’s because we think the screen is too small to express the software. As a software driven company, we think about the software strategies first.'”

I usually ignore rumor threads, but this one is strangely compelling.