Some have suggested that a 7.85" iPad is difficult to introduce because of Jobs's memorable quip regarding sandpaper and smaller tablets. I don't think this would really stop Apple from releasing a 7.85" version if they think the market will embrace it. But, as a nice break from the Jobs era and as a memorable line, they could simply start off the intro by saying "we got a great deal on some sandpaper...". I think including a square in every box would be going a little too far but would be awesome.
More seriously, I had been wondering why Apple didn't promote the improved specs of the iPad 2 with the 32nm process. It occurs to me that, by keeping the improved battery life as a silent feature, they would be able to use the new chip in an iPad mini (which will likely have a disproportionately smaller battery than iPad) and so maintain their 10 hour use standard for iPad easily. If they had promoted the 12+ hours life, it would make the battery life of the mini seem like a letdown (and, of course, would have highlighted the lower life of the iPad 3rd gen).