Tightly tied to the play shop?
"hopes to make selling content through its Google Play shop to which the Nexus 7 is tightly tied."
I wouldn't say the Nexus 7 is tightly tied to anything. I installed the Amazon Appstore(tm) - *snigger* without any kind of fight, no rooting required, just check the box to say "I want to install from sources other than the Play Store".
Now the Kindle *is* tied to the Amazon Appstore.
As for trimming the N7 to make a $99 tablet, I can't see it being the success the original N7 is. Dropping the screen resolution and removing the GPS would reduce it to yet another crippled budget tablet. The screen resolution, GPS and bluetooth were the big tick boxes I'd been waiting for on a budget tablet.
I'd say they would be better off making the 3G version which was rumoured a while back. Although for me that is not an issue. Plenty of wifi points for me to access, with very occasional tethering when required have kept mine happily fed with data since the 4th of August.