I'm of the opinion, and I accept it is only my opinion, that most people would want a larger screen, and that most people that visit Mac rumours would probably not, I've read about pixel size/density/angle of view etc etc, but, the trend for mobile (cell) phones, like it or not are for the larger 4" or even slightly larger screens, all the other big players have now larger screens. IMHO, if Apple don't follow suit, they will be left behind. I think that they will go larger.
I think you have this completely backwards. You are probably going to find more APP junkies here that want a bigger screen, but for a lot more average folks it is a phone first and carry/holding size is more important.
There maybe lots of larger Android phones but there are lots of small ones too, so Android caters to both sides of the debate with multiple models, so they can get more extreme on size. Unless Apple releases different sized models they have to play it more middle of the road. So I suspect the early 3.7" rumor form months ago is the most likely one. A bit bigger, but not so big as to turn people away.