The iPod Touch is more a tablet than an MP3 player. Calling it an iPod is no longer relevant. Rebranding it as a an iPad Mini would draw more attention to its real power and clarify the mobile line up.
If the rumors are true that the next iPhone will have larger 4” screen, the newly rebranded iPad Mini could share that same display.
There is also the suggestion that a new 7” iPad could be made from the same screen technology as the 3GS but scaled up to 1024 X 768. This makes sense from for the size of the device, but not for the density of the screen. Would Apple really want to launch a new product with a display that is rapidly becoming obsolete? Doesn’t strike me as being a very elegant solution.
My bet is on a new rebranded 4” iPod Touch with Retina Display (or close to Retina Display) everymore to be known as the iPad Mini.