There's clearly market for these under 10" tablets, but i personally just don't get them. Sure price is a factor as screen is always the most expensive component be it a phone or tablet, but other than that i haven't really ever got the idea of under 10" tablets (or under the ipad 9.7").
Phones screens are over 4" all over, so to me at least that make these smaller tablets useless. 10" looks small to me, if anything i would want to see more of 13" tablets like Transformer book. That 13" fits to the same bag or is just as portable as 7" tablet that's not pocketable anyways.
That said it would be interesting to see MS gaming tablet in 7" formfactor and hopefully tie it all up much better than Sony did with Vita and their Sony/Android platform. Could be something amazing. As for Nokia releasing 7" budget tablet in Q1 2013, that's not how Nokia usually works, but then they have been doing a lot of stuff they usually would have not done past couple of years, so who knows.