While relevant, to be fair he meant as the primary method of interacting with and navigating a handheld device, as in needing a stylus to scroll through your email, make calls, etc. This 'pencil' is simply for painting and drawing on a tablet, arguably a different scenario.

I think he also said he'd rather die than launch a 7-inch tablet.

He didn't seem to have a vision for tablets replacing pen/paper notebooks. The tech is here and prices are getting low (e.g. dell venue pro 8 with a stylus for ~$400); soon mainstream consumers will go fully digital and trash physical notebooks. Apple still can capture this opportunity, but they need to get past this idea that stylus==bad.

I'd guess the first company to get a 10" tablet with a good notebook application and stylus for under $300 will be the big winner in the classroom for the long run.