Just a brief point - I watched quite a few YouTube videos on my iPhone 4 last night, (just random ones really) and noticed most were not reaching the edges of the screen in landscape orientation so were not even 3:2 format - the "stretched" 4" screen leaked phone with 16:9 format would gain nothing over the existing iPhones for those kinds of videos except more black space at the sides.
I can't see HQ films being the mainstay of iPhone viewing, far more likely in-fact is general YouTube vids and the like - it's a phone after all. The iPad makes sense as a video device as it's comfortable to watch, a stretched iPhone seems like it's being done for the sake of it as competition do - not very "Apple".
A bigger screen is definitely preferable as smartphone use has changed rapidly and they are now basically used as small web-browsers or even mini work laptops - a merely stretched screen gains no real benefits in most uses, the phone wouldn't have to be much bigger to incorporate a 4.3" - 3:2 ratio screen which is just about the sweet spot for size vs convenience now the market has matured.
Many say they don't want a bigger screen - as long as the phone doesn't increase too much in size and remains easy to handle (tapered edges would probably make it more comfortable than the current design even if bigger!) I don't see any real negative to it and definite positives. Any extra size can house more battery to sustain life despite bigger screen.
Example below (I've wheeled this out before, just a quick photoshop but merely a demonstration of the not-much-bigger form factor required for this!)
Image