I'm going to settle this issue once and for all.
the size doesn't matter as much as the resolution. the nexus 7 viewed from a foot away or less, is like viewing a regular 32 to 60+ inch TV across the room. go to one side of a room, then hold up your nexus 7 at normal viewing distance, and pretend it's a flat screen on the wall behind it. look at the space it takes up on the wall and you'll see it is comparable to viewing large screen tv's from a couch or a bed. hold it even closer, but not too close to where you can't focus, and it's essentially filling the same view area as a typical silver screen in the theater! it's all a matter of perspective. the only difference is you're either viewing big pixels from far away, or small pixels from close up. the screen seems small, but for handheld waist or chest height viewing, it's actually pretty large. I prefer viewing small screens from close up than large screens at a distance or large screens close up.
the pixel density really makes the screen. wouldnt touch 7 inches at 720p...too much pixelation.