Right at the end of 2008, Michael Arrington posted some info from his sources on a rumored large form Apple iPod touch/tablet for sometime in 2009. There is now some information available on an Apple patent for a large display device. Even with these pieces of information and hopes of the Apple faithful, I am highly skeptical of Apple ever releasing an Apple tablet/large display iPod. The iPod touch is already priced at $299 and $399 and the original iPhone (unsubsidized) was priced at US$599 so an Apple tablet would easily be priced at $700+ I am sure. In today's economy that is an unreasonable figure when small form notebooks with actual keyboards can be used to do the same thing for $300.
I am sure there are prototype devices being tested and trialed at Apple, but just because there are prototypes and patents doesn't mean we will ever see such a device. As a mobile geek, I am sure it would be a very cool device and would sell a few thousand. However, the tablet form factor devices have really only done well in areas like the medical field and I doubt too many people would adopt using a touch screen only keyboard input method and would soon tire of such a device. An iPod touch works just fine for browsing on the couch, watching movies, listening to music, and controlling your home media center. I suppose Apple could come out with a 4 inch or 5 inch iPod touch to give you a bit better experience, but highly doubt we will see anything larger than that from Apple.
We may see a tablet type device running the Android OS because it should be able to be sold for $400 or so down in the iPod touch range. Then again, I still am not convinced people will readily adopt a touch only interface for text input.