iPhone 5 Mock Up

[TheMacBookPro]

Adding a different size screen would change the "retina display" pixel density, thus making it no longer be a retina display. Cramming more pixels in there to bring it back to retina screen status would only cause trouble for software developers which would need to support yet another screen/resource size.
A larger screen is definitely one thing that the iPhone doesn't need. Phones with large screens are VERY clunky, IMO.

Phones with 3.7/3.8/4" screens are all fine. 4.3" screens (Evo, HD2, HD7, etc) are slightly too big, but not 'very clunky'. If you try the Droid2 (3.7) or the X10 (4.0) they are definitely the perfect size. Any larger and the phone would simply be too big. Not excessively large but large enough to make you think "mm this is pretty dang big".

Edit: quick add-on: holding your iPhone in your right hand, try tapping the top left corner of the screen. A larger screen makes that experience MUCH worse :\ It's one of the reasons I believe the iPhone's screen size is just right on the sweet spot.

I can do that with both my iPhone4 and my X10. I have normal sized (some would say smallish) hands.

 

[Cod3rror]

I like the current size, I would much rather prefer them make it shorter like iPod 4.

 

[Gjeepguy]

actually the 4" screen could potentially fit in the current iphone 4 size

this doesnt leave a whole lot of room for connecting the screen to the bezel though.

 

[Magsec4]

If apple increases the size of the screen to 4 inches and keeps the same 960x640 resolution that'll drop pixels per inch to only 288, below Apple's definition of a retina display (300 ppi).

If Apple increases the resolution that might make developers a bit unhappy, plus it would make older apps look a bit odd, being stretched slightly (but nowhere near pixel-doubled).

At 4 inches diagonally the resolution to achieve retinal display status are as follows:

680x1020 = 306 ppi
720x1080 = 324 ppi

Those are pretty high resolutions for such small screens, not to mention non-standard. Besides, Apple just introduced the retina display last year. They're not going to introduce a bigger, higher resolution one just yet. Give it a few years.

 

[QuarterSwede]

actually the 4" screen could potentially fit in the current iphone 4 size

this doesnt leave a whole lot of room for connecting the screen to the bezel though.

Not to mention it would be way too fragile.

 

[mammadon]

I worked some mock-ups in my cad program and a 4" screen will fit:

Of interest is, they made the iPhone 4 narrower than the iPhone 3 (they took away the bezel and shrunk the case width closer to the 3.5” screen and squared it off). SO, if they widen the iPhone 4 case back out to the iPhone 3 width, keep it squared off, there’s room for a 4” screen (and keeps the same aspect ratio). So I'm betting the iPhone “5” (when ever that happens) will have 4"… (yeah, sad this is how I spend my lunch time)

See attachment:

Hopefully it will be a boon to the 4G market (I'm presuming since 4G is obviously being released soon).

 

[Sedrick]

actually the 4" screen could potentially fit in the current iphone 4 size

this doesnt leave a whole lot of room for connecting the screen to the bezel though.

As I mentioned somewhere else, I think Apple has painted themselves into a corner with the current squared-off iPhone. It would be very unpleasant indeed to hold a larger version of the current square edged iphone and it would look terrible in the pocket.

The most beautiful design I've have ever seen lies in the 4" Samsung Captivate. A friend at work has one and it's a thing of beauty - to hold, to use and to pocket. I'm not sure where Apple can go from the squared off iPhone 4.