The rumors of a 7 inch iPad seem to continue and will probably grow with coming tablet computers. In The Tablet Insider, an article focuses on the 7 inch iPad as something that should happen from Apple. This will not be the iPad 2, but could potentially be with the iPad 3.
There is much competition coming to the market from the likes of the Galaxy Tab 2 and the Blackberry Playbook which will take some sales away from Apple. These are both going to be great competitors and provide features and functionality people want to see. Apple cannot ignore these.
It is being reported that Apple will be including the NFC chip in the iPad 2 which will allow you to make purchases at retail stores. How usable the current iPad will be to carry with you while you shop remains to be seen. The 7 inch size seems to be more suited for that kind of situations.
While a 7 inch iPad is probably not going to happen with the next version, inclusion with the iPad 3 does seem like a definite possibility to happen. It will all depend on just how successful the competitors happen to be.