Is it possible to produce a tablet at that price? Yes, it's been done before.
Is it possible to produce a decent tablet at that price? Hell no! Unless of course it's a huge loss leader and they don't mind losing $200 per unit sold.
If there is a Nexus tablet (this is the first I've heard of one) at that price, then the Android tablet market is fucked. The Nexus brand has always represented a good standard for Android phones. Not always the very highest spec, but always at the cutting edge of it. If they launch a budget tablet then Google might as well throw in the towel now and give up!
Just for the record, I own a Galaxy Nexus phone and an iPad 2, I also love Android and really like the look of what Asus is doing with it. So this is not an iOS fanboy here, but rather someone who loves Android but would hate to see them take the budget route!
I don't think I would buy one as someone who owns an iPad 2.
I don't really know what it would take to get me to buy a new tablet of any kind because the iPad 2 really is good enough. The 2012 iPads are really nice but I don't feel compelled.