I think it will do it easily, specifically because down the road they will sell it as a cheap stand alone portable and a sub $100 console

Seems a bit high.

True, and IMHO the 720p resolution would work out FINE on a smaller screen, making it more pocket/handheld friendly.
They probably would drop the detachable controllers from a smaller model, given it is harder to "share" a smaller screen.
(but since it's still basically the same platform, it would still work if you paired it with separate wireless controllers)
I guess it would have it's own dock, although there's no real reason it couldn't just fit into OG dock well enough to work.
Along with process shrink (they MIGHT be able to launch w/ Samsung 10nm but I doubt it) that facilitates a smaller battery.
Although to be clear there would really be little cost difference between those models.  I guess they could go ahead and 
keep larger battery for bigger model for more play time, and upgrade the controls to have better feel vs. smaller model.

Bottom line, 3DS is doing well enough that it doesn't make sense to kill it off immediately even before Switch has had 1 year of sales.
Depending on how Switch does after a year or two, dropping 3DS (or deprecating it's priority for game dev) could make alot of sense.
And at that point I don't see why they wouldn't just focus solely on one platform, whether or not they offer smaller model of it.

This is not taking into account the people who bought both the Wii U and 3DS (which will be a considerable amount). But on the plus side, these people will now have more money to buy games instead of buying two separate pieces of hardware.

It doesn't work like that at all

Good point

Truth. The Switch could mean less overhead and more software sales. That is, if they let it be both handheld and home console. 

Imagine Mario Kart at $60 selling to a user base of ~50M. You're talking Wii-level game sales. 

Hahaha what if every single Wii u owner also owns a 3ds?

It's probably pretty close honestly.

I'd say 9-10 million of those Wii U owners have a 3DS, so you can lop 10 million off the total basically right away. 

If they are to match their last gen presence then yes they need to sell 160m. Meaning the ps4 will need to sell around 145m on its own.