Yes. Firstly, when it comes to reading text, the screens PPI is more relevant than its resolution. As you said, the Nexus 7 has a smaller screen. Even with its lower resolution, its smaller size gives it a pixel density of about 323 PPI, compared to the Nexus 10 which is slightly less sharp, at around 300.
Secondly, the Nexus 7 as a device, is better suited to reading. Its smaller form factor, lighter weight and better usability, makes it better suited to reading.
Even though the Nexus 7 has a smaller screen, that doesn't mean that the text size has to be smaller. You can easily change the text size to be larger, and it's going to be sharper than on a Nexus 10 screen.
I strongly suggest the Nexus 7, as it's generally a fantastic device, you'll save money if you choose it over something like the Nexus 10, it's more comfortable to use, and of course, has a sharper screen.
Tom
Sent from my HTC One