The iPhone is definitely due for a screen size bump. Some thoughts:
I just moved from an OG Droid to a GS2. The Droid has a 3.7" screen with a 16:9 aspect ratio, and I had no issue reaching every part of the screen with a normal grip. My GS2 has a 4.3" screen with a 15:9 aspect ratio, and although I can reach across the screen and touch all four corners, I can't do that with the base of the phone resting in my palm. It took some time to acclimate to, and now I typically hold the phone centered in my hand, but I feel like I have a higher risk of dropping it. If the screen were any larger I wouldn't be able to use the phone with one hand, and I think I have pretty average-sized hands - smallish for a guy, but larger than most women's.
Realistically, I think 4" is as large as Apple can make a screen before it becomes a 2-handed device for a significant percentage of their users, and changing the aspect ratio will help.