I think a 7" WinRT tablet would be awesome if priced at $199. Of course, it shouldn't be marketed as a full on productivity machine, in tech-parlance I'd refer to it as a "consumption plus" device whereby you get everything in it that a Nexus 7 offers, but more... e.g. the capacity to work on office documents, use the device at work, etc (just like Windows Phone).
Honestly though... I'm not 100% convinced that the Nook RT route would be worth it. I'd prefer a 7" device to be a Microsoft product and in line with the Surface branding. The reason is simple, Surface is en route to being a recognized brand, i.e. leading class, quality and slick.
For a 'consumption plus' device I'd offer a 7" Surface RT which strongly emphasizes the Xbox branding in music, videos and games. This is something people should look at as an awesome companion device for their Xbox, PC and phones, i.e. something you can't live without.
You may not even need the touch-cover, it might be more prudent in fact to make RT compatible with digital ink and pair "Surface 7" with a stylus.