I agree with you on this one. So much room on the bezel is wasted because of the big round home button. I've seen several of these break or fail over time. Just do a search for "Broken iPhone Home Button" in Google and you'll get pages of articles about faulty buttons.
Apple could make a capacitive home button and if they wanted to, include a screen print of the apple logo where it would be. It could light up when touched, similar to how the back and menu buttons do on the Galaxy S4 and Windows Phones. This would make having a larger screen on the iPhone easier.
have you not taken into consideration the speakers, microphones, plug? There is a lot more down there than just a home button.