Is doesn't matter what is the display size, is the software which does matter. Is all about user experience and total solution.
If 3.5 inch display works, the 7 inch display works as well. If without good and usable application, it doesn't work.
If Steve Jobs say 7-inch tablet is no good, then 7-inch tablet is no good. Just joking.
There is a description that strike me, Steve Jobs really knows the competitors well.