You're underestimating the pull Apple has on people. There are plenty who will pay an extra $120 just because it's Apple.
But already being tied into iTunes is a huge momentum.
Genuinely curious.)
People will buy it, but its not the homerun they were setup for, making it to 2nd base. Game is still on.
Well, that's assuming I needed/wanted a smaller ipad.
(Well I'd actually root it, than install a custom rom but still.)