I think Canon dilutes thier lineup with too many of the same cameras. Why would a consumer buy this vs the T4i for the same price? What's different about this and the T4i (maybe I missed that)?
This is a very good marketing decision, I had people tell me that they would buy a SLR if it was not so big.
Compare even the Rebel to an A1 and you will see how much bigger the rebel is. I look at my old A1 and wish the modern DSLRs were as small as it was. It seems that the large DSLRs are marketed at the crowd that believes the bigger the better.
Unlike buying a P&S with a fixed lens, a purchaser of a DSLR will very likely buy more lenses, then once you have some lenses you are "stuck" with a brand of a camera.