If we want a device that would be comfortably operable two-handed you still wouldn't have a 7" tablet - the 7" tablet would still have a huge swathe of dead zones where no finger can reach.

You'd have basically two iPhone screens next to each other, portrait - that gives us 4.9" diagonal, maybe a smidge wider would still work, but nowhere close to 7".

That's the only way to guarantee a comfortable reach for all screen locations. A 7" tablet is still way too large if the goal is complete two-hand operability. That's not a design goal of a table though, in its normal use case.

In any case, I have no problems against the 7" tablet form factor, so I'm not sure what the issue is.