What's interesting is that the DigiTimes report states that Apple will release 16GB and 32GB models of the iPad 3. No mention was made of the 64GB tier, which Apple currently sells in its iPad 2 line.
The still remaining iPad 2 will be priced at a lower value, much as Apple does with its iPhone line. When Apple released the iPhone 4S, the prior iPhone 4 model was reduced in storage capacity to 8GB and had its price lowered from $199 to $99 (on contract). Meanwhile, the price of the even older iPhone 3GS was lowered to free (on contract).
Apple has scheduled a March 7, 2012 launch event for the iPad 3. The date of release is still unknown, as are the device specs, but it's expected it will sport a 9.7-inch 2,048 x 1,536 "retina display," an A5X enhanced A5 dual-core processor, perhaps more RAM, be slightly thicker with better battery life, and have an 8MP rear-facing camera. It will probably also carry iOS 5.1, which is currently still in beta.
Earlier, it was rumored that Apple will ship a still lower cost device, a 7.85-inch iPad, by Q3 2012.