I really think the main reason why we haven't seen a change is because it has become iconic to the look of the iPhone. Even though the phone got taller, just glancing at it it's hard to tell whether it is a 5, 4s, 4, etc. Look at the silhouette logo for "smartphone". Almost everywhere you go it is the iphone silhouette with the big bezels.
Apple is also big on the "you can use the iPhone one handed and touch anywhere on the screen with your thumb". If you reduce this space, it might look aesthetically nice, but it also forces you to either reposition your hand (how you hold the phone) or go about using the phone in a different way.