Anyone's guess is as good as the next. Device leaks make it seem like it will not slide into the phone cases (ala stylus), but it does not do that on iPad anyways. I think it will just be enabled support on the iPhone - meaning if you have an iPad Pro, it will just work. If you want a stylus, you can buy an Apple Pencil and it will work on your 2018 iPhone <insert name>. And then you will see a whole slew of new cases to support carrying the Apple Pencil with your iPhone.
However, to your point - if they do not shrink it, it will be a PIA to carry. Measuring in at 6.92 inches will be taller than any iPhone.