Like you, I'm pretty ambivalent on the 7" format, but that isn't stopping people from buying Kindle Fires...
It's large enough to read on comfortably, and about the weight of a similarly sized high quality book, meaning that it is light enough to handle for a long time without trouble. It carries by hand very easily, and just doesn't get in my way.
The iPad (v3, btw), in contrast, is bulky and heavy to carry around and hold. The keyboard still isn't big enough to touch type on comfortably, and I am not able to produce content on it with a reasonable speed (after 1mo of use, I gave it to my wife). When I need to create, I usually ended up using my notebook computer, due to the size limitations and difficulty of using the keyboard while holding the device anyways.
In the end, the Fire is the perfect size for portable media consumption, and the addition of an unlocked (and high quality) operating system makes this new offering by Google a no brainer for me.
The iPad virtual keyboard is the same size as the keyboards on all MacBooks. Size is not why you're unable to type fast on the iPad.