I see no reason for there not to be a series of new form factors using iOS. Maybe one day it will even used to power household appliances. A low end version would sure as heck make microwaves easier to use! Imagine your stove on the network and checking the roast from your iPhone or the refrigerator linked to your shopping app to tell you if you have any milk when you are in the supermarket. I bet Apple are talking to many manufacturers from automobiles to dishwashers. Just look at all the controls on a washing machine and imagine it all done on a small iPhone like panel. The timers and heat controls all visual rotary wheels. Pre set programs called up not to mention the ability to create and save your own. The cost savings in mechanical parts and reduced maintenance would pay for an Apple iOS interface many times over. Plus online diagnostics by the makers is easy. Trust me this will happen. AAPL hasn't even started to take off yet. The next decade will see growth unimagined by even the most optimistic pundits.

This could only lead to fragmentation:

480 by 320 iPhones/iPod touches
960 by 640 iPhone
9.7" iPad
7" iPad

Too many devices with different resolutions is not good! Just look at the android market to see that for yourself.

The iPad is the perfect size. Why in the world would Apple make something the wrong size? I don't believe this rumor.

i agree, instead of a smaller form factor to reduce weight, why not improve the current model to reduce weight. I am one that subscribes to the fact that the current model is too heavy, comparatively speaking. The ipod Touch has the same guts in it, except for a larger battery and screen size, and it only weighs 4.05 oz. I can't imagine the screen and battery contributing that much more mass. Even if they reduced the current model to 500g (17 oz) it's still too heavy, but getting closer. After using the Nook (11 oz.) and the Kindle (8.7 oz), they both seem like the right weight for a device of this form factor.

This has the pungent scent of leaked disinformation about it. I don't believe it for a second.

I think this is a rubbish rumour because after using my iPad now for several months I don't think it is in any way too big. I find it quite convenient to take with me wherever I go so I can find an answer to any question that may arise at any time. The display is magnificent, so I would not be particularly interested in an iPad with a smaller screen.

iPad is too heavy??? What about laptops that weigh 4 or 5 pounds easily? The main weight is the battery anyway, not so much the screen, so I fail to see how this rumor has much weight. More likely, the weight stays the same (because battery technology doesn't get that good/lightweight that fast), and they add in updated processors w/ more RAM and a camera for FaceTime.