Which is what I use, incidentally. Currently 10" but has been 9" before. Running Visual Studio 2010 for the zoomable IDE, and I find it makes a very nice development platform. Highly recommended for such use.
Besides developing NUI apps straight on the device is interesting, instead of developing on a machine then upload and test on a tethered device.
Edit: Also, plenty of value is created by programs that had thick "runtimes". Think of anything from Visual Basic to Hypercard to things like Excel spreadsheets.
To the point where I've been thinking about doing it for a long while, but clearly someone was way ahead of me. :)
The way you worded this reminds me of Gary Kitchen's Game Maker.
http://www.garrykitchen.com/product_history/garry_kitchens_g...
[1] http://code.google.com/p/squeakvm-tablet/
[2] http://news.squeak.org/2010/06/17/squeak-running-on-ipad/