There is plenty of room for an upgraded 7D. This makes sense. The 7D should be updated with some of the features of the flagships while keeping the price affordable near its current range. The xxD line adds values at its price range around 1 K as a stepping stone and the Rebels can come in below for hobbyists and families on a budget. Is important to Canon to match people's aspirations with options that offer real value and performance differences.
The pricing on the 5D Mark III created the room. There are features that can be added within the current price of the 7D that will keep it selling fast and well loved. The 5D Mark II will be phased out in time and the if the 7D was not upgraded you would have a crater between the $900 60D APS-C and the $3,500 5D Mark III. Once the R&D is done on the features of the 5D Mark III and the 1D X Canon will monetize them by putting them judiciously in cameras that will sell more briskly. The XXD series will also get new features but the 7DII is great aspirational bridge they don't want to phase out.
Yes, this all makes sense. Since we are speculating here, I predict the following:
5D jr. (They will need a new name here.) Full frame "entry-level" Frankencamera. Sensor: either current 5DII or 5DIII depending on whether it is cheaper to keep making the 5DII sensor or just up the volume of the 5DIII sensor. Canon likes to reuse sensors, so it makes sense to hand the 5D III sensor down to the "jr." Processor? Again, is it cheaper to keep making Digic IV or to use Digic V? I'm guessing Digic V. So, we could see a full frame "entry level" body with a new sensor and new processor, but keeping most of the other features of the 5DII. Price this in the $2,000 to $2,500 range. If all they do is change out the processor and sensor, it may not be much more expensive to manufacture than the current 5D.
7D II Modest autofocus improvements, improved sensor with better low-light performance and reduced noise. Sensor remains somewhere in the 18mp range. An 18mp APS-C sensor would likely enable Canon to use just one processor instead of two, cutting their processor costs in half, while still boosting or maintaining the current frame rate. With three years of R&D under their belts, the image quality should be roughly equal to the 1D IV, enabling Canon to market the camera to wildlife and sports photographers as well as enthusiasts and prosumers. Priced between $1,600-$1,900 (this is a very competitive niche, so Canon is more price-restrained than with the 5DIII).
70D Will inherit the 7DII sensor after about 9 months to a year. Other modest upgrades to allow for room at the bottom end of the line for enhancements to the Rebels. Again, pricing will be determined primarily by the competitive marketplace, but likely will be similar to the current 60D.
7Dx: Pure speculation/dreaming on my part, but I still don't think we can rule out the possibility of an integrated gripped 7Dx with additional weathersealing and perhaps a higher frame rate, geared toward wildlife and sports photographers. As a successor to the 1D IV they have a lot of pricing flexibility here, but I will be conservative and say they keep it in the $2,500 range. High enough to make a tidy profit on the improvements, but low enough to entice enthusiasts with discretionary income.