Continuum of Usability
Every protable device is a compromise between portability and usability. The difference between a 5" phone and a 7" tablet isn't dramatic, particularly for those of us with older eyes, so having a 7" tablet that isn't a phone and won't fit on your belt just isn't a strong value proposition, but it make a decent e-reader. The 10" tablet adds enought screen real estate to make a difference, though without a better input method than typiing on glass, it remains primarily a data consumption device, and is severely limited for data creation. A real live desktop (or in a pinch, laptop) computer with a real keyboard and mouse is, for the forseeable future, going to be the natural home for people who are creators.
Bottom line, there's a market for a range of devices, and even a 'tiny' market for 7" tablets will amount to millions of units per year. The market will always change over time, but it is as silly to predict the imminent death of tablets as it was to predict the death of desktops.