I think that 9.7 inch in many cases is too large and the device becomes too heavy and too unwieldy, especially when you use it as an eBook reader. Besides its crippled operating system and lack of interface ports, the iPad's current form factor and weight are its greatest disadvantages.
You might have a point about the weight, but screen size has only a little bit to do with weight.
But where do get the cripple OS comment from? Everything I have seen of these other tablets show their operating systems are far less along and are crippled even worse than the iPad on 3.2. Plus 4.2 is right around the corner and will solve all that "cripple" you are complaining about. The other tablets might have a few software features that are attractive to people who like eye candy, but in terms of functionality the iPad (with 4.2) completely kills them.
Lack of interface ports isn't really a bad thing. Having only one port has it's advantages because it takes up less space and gives the device more room for it's battery. Battery life is a crucial part of tablets, and I think it's something that many people quickly forget. Also, what do you need more than one port for? I think the only downside of the iPad is that the dock connector can't be used to do more stuff. That isn't an issue of needing more ports, but really just needing the ability to do something like HDMI out, or tethering from an iPhone.
Going back to the size/weight thing. I think Apple did the best they could to get the weight down, but it's really tough to solve the weight thing and not run into issues with battery life. The VAST majority of the weight on the iPad is the battery, not the screen, casing, or other components. If they could come up with a way of keeping the same battery life but still slim down the iPad, it would be about perfect.
The weight is only an issue if you have weak/small hands anyway. I really doubt that there is a huge market clamoring for a 7 inch tablet. I think people right now don't really know what they want because it's still too new of a device to them. Many people want the iPad because it runs iOS and it exists on the market right now, unlike all these other tablets which haven't been released yet. So right now Apple has a huge advantage, and because they have a head start they will continue to have an advantage by a sizable margin going into the next couple years as well, assuming the iPad 2 is a nice step up from the 1st gen and they keep improving it every year.