Of course Apple will never, ever, ever release a 7-inch iPad, the argument goes, why would it, its product lines are models of simplicity, etc., etc. So here’s the news from out of China, Apple is prepping a 7-inch iPod touch.

This is the word hailing from Shanzai.com. which claims that Apple’s forthcoming new tablet (much discussed right now across Shenzen’s social scene) will be a 7-inch model. Oh, and it’s a finished product.

And in case you’re wondering, there’s five or more different prototype designs in circulation right now, to protect Apple from competitors and leaks as it moves inexorablyiPad 2.0.

The final design seems set to reflect the look of the iPhone 4, rather than the iPad, and it is likely to include front and rear video cameras and so on…