I read, watch movies, make movies, play games, etc... All of those activities would benefit from a larger screen thus improving the "experience". The feature I use least on my iPhone is the phone. I understand you want to keep the footprint small, I do too. But, I have faith in Apple to increase the size of the screen without greatly increasing the size of the footprint.
Just because Apple chose a 3.5" screen doesn't mean it's the ideal size screen. I've seen and used other smartphones with larger screens and I prefer it over my iPhone 4.
We're talking not even an inch increase, the iPad screen is 9.7", a far stretch from 4.3".