Apple reportedly testing 7.85-inch iPad prototype

If they want to bring out an ~9" iPad, they have to solve a very interesting design problem. I don't think is solvable and therefore am doubtful about a smaller iPad, but on the other hand Apple has more and better paid people working on this. The decision they are facing is basically:

A) Just shrinking down the existing viewport (like the article suggests). Problem: would break Apple's own Human Interface Guidelines regarding minimum sizes for text, touch targets, etc.

B) Just adding it as a new device format in the SDK like when the iPad came out. Problem: more Platform fragmentation.

I realize that Apple is in a position where they could choose to go along with the fragmentation, but it would seem strange. I am hoping for option C which only they know.

I would totally buy a smaller iPad. My wife has an iPad but I ended up going with a Galaxy Tab 8.9 inch because it's the perfect size (the iPad felt a little too big for me). Though the Galaxy Tab kinda sucks.

I might get one as well. The main thing I don't like about the iPad (and other 10" tablets) is that I can't conveniently hold it in one hand.

At 7.85 inches used at the iPhones viewing distance it will be very close to Retina if it has the iPad 3G resolution.