I would not mind if they did this at all. Even if the current Note 2 were only 5 inches, I might have even liked it better than the current one (...well, probably not, but still would've been fine with it). Ultimately, it could cut down on production for them, especially if they come out with the Note 7.
With the "rumors" and existing Note lineup, they'd have the 5 inch phone, 6-6.3 inch phone, 7-8 inch Note Tablet, & 10 inch Note tablet. I can even see them bumping up the 10 inch to 11 inch, just like the ATIV Windows 8 tablets. Having a 5 inch and 6+inch phone would help them compete with Sony that'll have both sizes in 2013. Next year is going to be interesting and seems like it'll be a transition year for "new" concepts.