Our source has indicated, however, that the 7-inch iPad will be identical to the current 9.7-inch iPad, just scaled down. That seems to include a 2048x1536 resolution display, just like the new iPad.
All of this sounds plausible except that screen resolution. A 7” display is so much smaller by total area than the iPad’s 10” that most apps’ interfaces will need to be manually adjusted or redesigned. You can’t get reliably usable results by just scaling down 10” apps to a 7” screen automatically.
And if they can’t reuse 10” apps without modification, why would they need to make the display so dense to keep the same resolution? They’re having enough trouble cramming that resolution into a 10” device and getting enough of the panels manufactured to keep up with demand.
If this 7” iPad is real, maybe it has a 1024x768 resolution, yielding a logically 512x384 area, in half of the 10” iPad’s screen area. Effectively, it’d be the iPad 3’s screen cut in half. (Then apps could keep a consistent scale for interface elements, which would make development a lot easier.)
That sounds a lot more likely if they want to hit a $249 price and make a profit.