That nemesis thing is interesting. I probably wouldn't buy it, but very interesting nevertheless, if it comes from Cyanogen.
I woudn't hurry so much with selling your TouchPad because it's likely to take a while for the new N7 to become available. The N7 is significantly smaller, but you get used to the screen size fast and personally to me 7-8 inch is the perfect size for a tablet. The resolution is big, so you feel like the screen is bigger than that and at the same time the device is very travel-friendly. It's also more convenient to type with after you get used to writing in vertical mode - it's perfect for 2 thumbs and I usually use my tablet for Facebook messaging, it's that comfortable to me. It feels like it's the form factor allowing to do most things the fastest and in the most convenient way - its handling is better than on a smartphone while it's not a problem to have it with me, and it's easy to carry around.
I never liked the 10 inch format mainly because it seems to be too big and handling on those tablets is far inferior. The only positive is that the screen is bigger, but unless you use both, the 7 incher is not going to feel too small.
I think this best describes the differences, and shows them both together so you can get a feel of the size. If you want my opinion, the guy shares it as well at 7:10 - exactly my thoughts too: