With a 4 inch screen and a slight change in display ratio, going from 3:2 to 8:5, you can keep the resolution above the "retina" cutoff which I believe Apple declared as 300 (actually has little to do with reality).
This means going to a pixel count of 1024 on the longer axis, adding a depth of 64 pixels, but keeping the short axis at 640. Apps don't have to use the extra area so no rewriting is necessary for games and such that have pixel-perfect design. The extra space on the end could be used as a status bar by IOS, like what they do when you turn on wifi hotspot. Apps that easily benefit from the the extra space, like Safari and readers, could use the whole screen. Movies would also benefit from the more natural proportions.