RTFA!!!
Folks, it's well worth parsing out the article -
- What is the opinion of analysts, the writer, her unnamed sources (*cough* Phil Schiller *cough*

) and also general rehashing of old news.
Who says what?
The form change is
conjecture;
"
Industry sources told Times Online the device will have a "radically different" appearance to the current device
Then the writer doesn't differentiate between her thoughts, or whether this is still from the industry sources:
"
Among the possibilities are flip version, which would enable the screen to be larger, and a sliding model with a regular qwerty keyboard - as opposed to a touchscreen one.
She quotes a Asia-based analyst "I think ultimately you going to see multiple versions"
More on another thread - but lets keep things distinguished.
A big screen helped make the iPhone what it is. The main next gen version is very likely to still have a large screen. (Agree with czeluff).
Jeez- how would developers feel if Apple came out with a itty bitty screen that they hadn't factored in their design of their app? Pissed off that's what. Bigger screen would be useful, smaller would be not useful for internet and video related things. (Think iPhone vs iPod nano for using video etc).