That's what CNet are reporting:
According to the tipster, who wishes to remain anonymous but has proven reliable in the past, Barnes & Noble's new ereader will be called the Nook Color, have a 7-inch screen, and retail for $249.
The tipster said the entire company has been focused on this product and that "it's a big step ahead, instead of chasing Amazon." While the new ereader is Android-based, the source indicated it wouldn't have the same functionality as the iPad--but it would be half the price of Apple's entry-level tablet.
My problem with this is that they already had a 7" Android tablet; that was the Pandigital Novel. It didn't work out to well.