I don't think we can use Apple TV as a comparison because the performance requirements are relatively fixed. Remember, for my 2017 A10X Apple TV, and it can play mostly the same 4K material as the A15 model, including 4K HDR with Dolby Vision and high resolution audio at the same bit rates. Plus, it's hardware accelerated anyway. The main difference with the latest model is that it can do it with less heat generation, and go fanless.
In contrast, we'd want the M2 Mac mini to be significantly more performant than the M1 Mac mini.
That said, they could go smaller, but that's because the M1 Mac mini is bigger than it needs to be in the first place.
M1 Mini is inside a case that is designed to cool an Intel CPU that produces double the wattage in heat and as a consequence one (pleasant) side effect is it's virtually silent for most people for most ordinary workflows. I'll add that my 14" MacBook Pro is stunningly silent compared to my 15" Intel MBP.
The hardware encoders/decoders do a great job of keeping the CPU relatively quiet and thus allows the heat to reduce quickly. In theory, the Apple of Jonathan Ive would have been looking to make that case smaller and more svelte. The Apple of Tim Cook would have kept it the same for more practical reasons and as a low seller the money wins out.
My argument at this point is that money is winning out again this time - Apple should hopefully have realised in the first half of this year that shipping costs were not going to come down quickly thanks to the war in Ukraine and energy prices staying high. While they can't do much about most of the range, Apple have been able to reduce shipping costs by removing the charger blocks from phones. They appear to have done the same with the AppleTV by removing ethernet and the fan - remember that iPhones and iPads are fan-less too and they play sophisticated mobile games.
I'm taking the mild redesign of the AppleTV as evidence that Apple is looking to reduce costs to keep headline prices down where they can. It's unavoidable in the iPads and iPhones of this world - the iPhones have already had the chargers removed to keep shipping costs down.
My point would be that Apple may have decided that fitting more Minis on to a pallet, ones which have been redesign to be polycarbonate and more radio transparent, and lighter, with cheaper or fewer parts on board will enable them to keep spiralling shipping costs under control.
If they have decided that component and shipping costs will remain high for 2, 3, maybe even 4 years - then a smaller, lighter, less complex to make Mac mini might be the way ahead to keep the low end ticking over.
Losing the ethernet port, for example, if the co-location guys are shown an alternate way to get ethernet on board - even if it's using a USB adapter - they might be on board with a price cut.
I doubt they will be overly worried about what a smaller form factor or less powerful (or even missing?) cooling does to acoustics or the people who want only the highest performance possible without the spectre of thermal throttling - it's a Mac mini at the end of the day - we're not very far away from Apple declaring something along the lines of:
'Mac mini - packing the same punch, only smaller.' - type taglines.
8/8/256 will be competitive with the same M1 performance wise (if not massively more powerful) but if Apple can pull off a price reduction in dollar terms or a marketing punch or even if it comes down to Apple taking more profit per unit if the M2 isn't new enough to show off massive new benchmarks.