onboard can be made thin to the point of unusable

How the onboard keybord looked zoomed ...

I can partially confirm this, though here resizing is still possible at minimum size, as long as frame resizing is enabled, which is Onboard's default. It takes some patience to hit the frame handles, but I managed to do it with fingers repeatedly.

Nevertheless, this should be made easier. For the time being there is now a somewhat larger hard-coded minimum keyboard size. Once the Nexus 7 allows it, the minimum size will increase to fit a 3 finger tap for Unity MT grab handles.

Problems:
- xrandr/GTK don't return valid physical monitor dimensions on the Nexus7.
- Unity MT grab handles are unavailable in "force-to-top" (override redirect) mode, which apparently is the default for the Nexus 7 PPA.

So, in short, it seems we'll have to figure out an additional way to recover from this.

The upcoming release has some relieve, a gesture. A two finger drag moves the keyboard and at the same time turns on Onboard's own touch handles to allow for resizing. There were a couple of other experiments, but the gesture seemed to be the least weird and may be useful for all window sizes too.
Drawback: not easily discoverable, though frantic tapping might trigger it accidentally ;-).

The minimal window size is still similar to what I described in #2, at the moment barely enough fit two fingers. Once Raring knows about the physical screen size, it grows to 5x2cm².