Actually, after the 1st year of availability, Apple really took the focus off of iPod Touch being a music player and started pushing it's gaming capabilities. As a gaming device and a bridge to the iPad, 5.5" iPod Touch makes the MOST sense.
https://www.youtube.com/watch?v=DHCFy8WrbUo
The iPod is still (and always will be IMO) synonymous with music.
The mobile gaming market may well be crying out for a 5.5" device, but I don't think that Apple would turn the iPod into that device.
Also, I don't personally think that there is a desire for a phablet sized gaming device.
The thing about phones being able to play games at nice resolutions, is that we have our phones with us already, so if it can do games well as well, that's a bonus, as IMO people who play games on their phones do so because they can, not because they necessarily want a gaming device.
If people wanted a mobile gaming device, there's enough PSPs and 3DS's out there to choose from.
But people choose not to, because they'd rather game on the smartphone they already have with them and not have to carry round another seperate device.
That's why the 5.5" iPhone makes sense-it will carry out all of your iPhone duties, alongside great video capabilities and gaming.
 
 
		 
 
		 
 
		 
 
		 
 
		 
 
		 
 
		 
 
		