I appreciate that different people use devices in different ways, and that the iPhone has many more capabilities than a standard dummy phone. The thing I can't wrap my head around is why would you sacrifice portability for .5 inches?
iPhone has always been targeted at the smartphone market, for all it does loads of other things. The main things are email, phone, and music player. These things have been accomplished well on devices with half the screen of the current iPhone. Web surfing on the iPhone was always excellent, and there's loads of apps that'll get you information on that size screen just fine. It's even a decent gaming machine. Again, the screen on iPhone already bests what Game Boy used to be. If you want to kill time, there's no worries with a screen like this.
Honestly, if you want to write a novel, update a spreadsheet, process pictures or movies or whatnot, you ought to be on a larger device like a computer or at least a tablet.
Up to now, Apple's been extremely smart with this. Better screen, not bigger. I honestly think the consumers have gotten taken up with the multitude of Android screens which seem to get bigger and bigger but still can't hold a candle to the Retina screen. Heck even the SGS2, with that supposed killer screen. Hold your iPhone next to it. It's not even a contest.
To quote Jeff Goldblum's character in Jurassic Park, "You were so preoccupied with whether or not you could, you didn't stop to think if you should."
I would not be sorry at all if iPhone 5 had exactly the same screen. Anyway, off my soap box.