This falls firmly in the "I'll believe it when I see it" category.
It's possible that they might be able to mass produce something like this in the $800-$1k range, given that the base MacBook Air starts at $1800. And this would have a lot more in common, hardware-wise, with the Air than with the Touch.
To get sufficient buyers, I think they'd have to get it down at least to the $500-$600 range, or maybe even lower. And I don't think that will be feasible, especially given how people would expect to use it. The screen area is 4x, which multiplies requirements for memory and processor and network throughput and batteries... which all still has to fit in a sexy form factor.
Still, it would be sweet. :)
I completely see that laptops with digitizer screens that can be turned into tablet form factor are enhanced laptops. Laptops+. Laptops 2.0. Yet they haven't really taken off, and nobody (except me) seems to think they're cool.
Instead people (you included) want Eric-the-half-a-laptop.
Why?
The iPhone wouldn't be better with a 7" screen; it would be at home because it wouldn't fit in my pocket - after all, I really only want one convergence device and that's got to be centered around my phone because a) that's the main functional thing that I want to carry around everywhere and b) what good is a portable device without a cellular radio these days anyway?
However, I can probably sum up my reply to:
I feel unjustifiable angst that Apple might be spending some of their limited quantities of human effort building a wretched minitablet instead of any of the iPhone improvements I want to see, therefore I don't want it to happen, therefore I wont believe it even if trusted sources have actually held one.