A DigiTimes piece, sourcing its own "analyst," claimed that the device would be making a jump to the Cortex A9 processor core, 512MB of RAM like the iPhone 4, and a 1,024 x 768 pixel IPS panel — the same resolution as the 9.7-inch iPad giving the new model a better pixel density.
I was shocked the first time I looked at an iPhone 4 screen. It turns out that Apple's much-vaunted "retina display" isn't just hype: The pixels are so densely packed that it looks like the text has been printed directly on the screen. If Apple can make a smaller, lighter iPad that approximates that kind of pixel density, this thing will surely become their go-to e-reader. (It would be even better if, Pixel Qi-like, you could shut the backlight of the display off, making it visible in daylight and cutting down the battery use to the point where it could go days without recharging.) I don't think Apple is so invested in e-books yet that they're willing to make an e-reading-only device—calling it an iPad Reader, for example, might turn off the people who use iPads for gaming—but I bet they're going to be pushing this rumored smaller iPad at Kindle-users.