I thought the iPad had a much lower build cost than other manufacturers... mostly because of the great supplier contracts that Apple has in place. With that, they may be able to build a smaller tablet that's far cheaper (say $250-300).
I agree and I think $250-300 is right around the right price I would pay for a quality tablet. I don't expect Apple to release one in that price range though since that would put it in the same price-range as their iPod Touch.