So Apple needs to create multiple screen sizes. They did it with the iPad.
PS: Don't say the 4/4S classifies as multiple screen sizes. We all know they're just the old models and are on the way out. They are not still on sale so people can choose a different screen size. They are still on sale because they cater to those who want a cheaper iPhone.
Creating multiple screen sizes may not entirely be the "perfect" solution like it seemed to be. Despite the advent of the iPad mini, there're still people complaining about it being too big, and many of them attacking Apple claim of "holding it comfortably with one hand" theory.
In addition, if Apple was intending on the creation of a so-called "iPhone mini", shouldn't we be seeing some traces/evidence of it by now? People here knew the iPad mini was imminent because there were pictures of it appearing during manufacturing, which was why 7.85" was already 90% confirmed before the keynote.
Let's face it, assuming even if Apple did release a iPhone 5 mini this time with a 4" screen + a iPhone 5 with a 4.5" screen, people will be asking for a 5" iPhone and claiming both the iPhone 5 and the iPhone 5 mini is too small. Furthermore, I don't think Apple will release a two iPhones with a wide difference in screen size, eg. one with 4" and one with 5". The disparity would be too huge and it will look funny and outlandish, not to mention sparking confusion among customers. Just my 2 cents.