I'm getting used to the 16:9 screen ratio. The problem is that - compared to the Galaxy S3 and the HTC One X which also come with 16:9 - the iPhone is way too tall, because Apple somehow felt like keeping both a rather large home button and a top bezel that has the same height as the bottom one. In other words, while the 16:9 screen is not that bad by itself, not significantly reducing the top and bottom bezel make the iPhone look more like a longPhone. I am both surprised and shocked this design seems to have been approved by Jonathan Ive. On the other hand, the 11" MBA is similar design fail due to the 16:9 screen.
I really don't get this view. I mean, don't you want to be able to use your phone with one hand? Don't you like being able to put your phone into your jeans pocket without feeling like there's a massive plate in your leg? I think "too small" is a very subjective idea. I like having a phone that's small and inconspicuous and, thanks to the great UI design in so many apps, still lets me do all the stuff I need to do.
On the question of the top and bottom bezel, I've seen mock ups where these are reduced and they look awful. The phone has no balance to it. Also, think of how you hold you phone. Pick up your iPhone, if you have one, and hold it in landscape mode up in front of your face, as if you were taking a video or playing a game with tilt controls. The bezel at either end of the screen allows you to do this without covering the screen with your thumbs or activating any buttons with accidental touches. It makes for a nice, secure grip. Take away these areas and maybe you can make the phone a centimetre shorter (you'd still need some space for the home button, speaker, camera and so on) but you'd lose both the aesthetic balance these areas give the phone and you'd lose that nice, comfy holding position in landscape mode.
Good design often appears strange at first - this is what happened with the 4 - but the quality shines through once you've used the item in question and it keeps feeling and looking great long after the flashier designs have started to look old fashioned.