There is plenty of pricing and design room for a 7D Mark II. It would stay as the top prosumer camera. There are features that would make it attractive for action shooters that could be added w/out damaging any of the DSLR line: better low light performance (less noise), improved IQ, 61 AF metering system, match the 5D Mark III video, and a faster focusing system. I would be queued up right away at $1,600.
That sounds like way too many features to fit a $1600 price point. I think if they were to make a detuned aps-c version of the 5DmkIII it would have to be at least $2500. Also, with all those features and a $1600 price tag, don't you think that would hurt sales of 5DmkIII's and even 1DX's? There would be a ton of people choosing the 7D over a 5 or 1 series because they believe it's the better bang for your buck.
$1,600 is probably too aggressive, but I wouldn't be surprised to see something around $1,800-$2,000. Not necessarily with quite those specs, but some incremental improvements over the current model with most of the emphasis placed on sensor improvements.
As far as hurting sales of the 5DIII or 1Dx, Canon doesn't seem to be overly concerned about cutting into sales of one model with another. They would have never released the 5DIII with the features it has if they were worried about protecting the 1Dx. And, look at the clustering of Rebels and the 60D – barely any differentiation between those models.
In the current competitive marketplace, making sure they have an model that can retain existing customers and draw new customers from other brands seems to be taking precedence over protecting one model over another.