My dream iPad would be one that precisely doubles the screen of iPhone 4, i.e. 7-inch, with 1080P resolution, and then I couldn't wish for more. I think this would be the ideal form-factor + picture quality for many users.
However, if the rumors are confirmed, we are gonna see iPad with screen quality (read DPI or PPI) less than that on iPhone 4
Blame the batteries, Vitaly... others have more insight than I do on this, but my understanding is that more pixels requires more processing power, which means more heat and less battery life. I don't know if Apple does this, but I believe it's the Samsung nexus that actually ships with the processor clocked slower than max speed to improve battery life. It's one reason a phone like the Nexus has worse battery life websurfing than an iphone 4S, but has equal talk time. Takes a lot of juice to keep that big screen lit up and working.
I really can't see Apple putting out an iPad or even an iPhone that doesn't meet their "Retina Display" criteria, which is a PPI of at least 326.
For clarification, that means I don't think a "mini" iPad will be released *if* the iPad 3 does in fact have a PPI of 326 or higher. However, if the iPad 3's screen is *not* "Retina Display" worthy, then they it might be possible that they would release a "mini" iPad.
The reason I say it like that is because I can't see them getting a 8" iPad to 326 PPI just yet, and it would be really "backwards" of them to release a iPad without Retina Display *after* having released one with a Retina Display (iPad 3?).