That's not a significant reduction in size, but a reduced bezel sounds appealing. many complained that the iPad's 1-inch bezel surrounding the screen gave it an odd look. After using the device for nine months, I can say I don't notice the bezel any more, and it's actually where I tend to grip the iPad the most when holding it.
The blog also notes that the back surface of the iPad 2 will be flat. The original iPad has a curved back panel, which tapers at the edges. It makes the iPad more comfortable to hold, but wobbly when placed on flat surfaces such as a table.
Last, it appears as though the iPad 2 might be given a more capable speaker (though why, I can't really say). Early case designs of the iPad 2 showed a slot near the bottom edge of the device. Now it is believed that this slot will cover a larger speaker for the iPad 2.
Earlier this year, Reuters reported that the second-generation iPad will have not just one, but two cameras. One will face the user (for video chats) and one will face outward. One of the earliest criticisms of Apple's iPad when it was first announced was its lack of a camera. The new reports don't mention if it will have two cameras or not.
Reuters' named Genius Electronic Optical and Largan Precision as the two component suppliers making the iPad's cameras. The sources weren't able to confirm which supplier is providing the front camera and which is supplying the back camera, nor the quality of those cameras.
Other companies supplying parts for the next-gen iPad include Wintek (touchscreen controllers), Simplo Technology (batteries), and AVY Preciscion (housing modules).
The next generation iPad is also reported to be lighter than the first generation model, and will also have a better resolution display. The current iPad's display measures 9.7 inches and packs in 1024 x 768 pixels. It would not surprise me to see Apple gift the iPad with a larger version of the Retina Display, which is used by the iPhone 4 and latest generation iPod Touch.
As for timing, everything appears to be on track for a late March or early April debut. The original iPad was announced by Apple CEO Steve Jobs on January 27 of this year, and it hit store shelves on April 3. The timing of the new iPad seems right, given Apple's general behavior regarding product updates.