Much like the MacBook & MacBook Pro offerings I believe that Apple would have a market for a regular iPhone as we have it now, and a iPhone Pro with a slightly larger footprint to accommodate a 4" display. I've been using both an iPhone 4 and Captivate with it's 4" display and find that display size to be extremely beneficial when on the web, or when composing emails with the phone in the landscape position. there is more room in the composition window above the keyboard to see additional lines of text and more room for your fingers to scroll the display.
It's funny what one becomes accustomed too. At first I thought it was a luxury to have that size of display, now it seems like a normal size. Working with my iPhone 4 now seems cramped. There would be very little increase in the overall size of the phone as well. Since Apple is well know for small devices I believe they could include a 4" display with only a few extra millimeters in width and length. Ad a millimeter or two to the thickness for a larger batter, then offer SWYPE, for an additional input choice and I do think it would influence many people who are not iPhone users to buy Apple.
Speaking only for myself, I know that SWYPE was a shocker.. a really great app that gives you a slightly different keyboard layout, then allows you to "glide" your finger along the keys instead of tapping them, to compose words and messages. Once I used a BlackBerry for a few years and never though I could get along with a touchscreen keyboard. I was right, given the huge number of emails I handle on my phone, the virtual keyboard was not very popular with me. SWYPE on the other hand is every bit as fast as a physical keyboard. In my case it's a lot faster. A feature that will be a deciding factor, going forward as to what phone I buy.
