John Gruber talking about 8-inch iPad reported by WSJ:
This is not the iPad 3, which I believe will have a same-sized (9.7 inches) double resolution display. This is a different iPad, which, last I heard, Apple was only considering, not committed to bringing to market. I wouldn’t bet on it.
I agree with Gruber. We’ve known for a long time that Apple has been testing different screen sizes and there is no reason to believe that they have stopped. With advancements in display technology and other factors, it may make sense for a slightly smaller iPad at some point.