This image is not misinformed. I think it's a great visualization of what an average sized hand experiences with a phone. If you have larger hands and/or prefer larger phones, no one is forcing you to use an iPhone. When Apple designs products, they actually take into account the user experience, unlike other companies. A 4.3-5" screen might sound good on paper, but in real world usage, it just isn't practical for the average consumer. Not to mention the unnecessary fragmentation it would cause for developers.
It would cause no fragmentation whatsoever as long as the resolution was the same or scalable. It's great that the iPhone is big enough for you, but what gives you the right to say I can't want one suitable to my size? Or are only average people good enough to cater for? Why don't we take the average shoe size and mass produce those for everyone?