My oldest is using an iOS 7 4s, her sisters a 3G (just as a phone, no apps). We have another 4 here, oldest uses it as a touch. The kids have 4th gen touches.
Still a lot of love for the small screen here. I did upgrade from a 4->6 though.
There are a lot of 4/4s size phones in the wild if you go with what I saw at Disney.
Oh and my kids get irked with iOS 7 only stuff, but such I'd life... I will evaluate devices at the end of the year and see where we should go next. I hate replacing their touches just because, since they take great care of them and they are like brand new.