I don't see how that analogy is relevant. A smartphone with a 2" screen is unusable, while a smartphone that is 3.5" is not. I owned an EVO before the iP4 and I would have to say that I miss the larger screen, but on top of this I love the higher resolution. Hopefully in the future we can get both.
My point was an exaggeration in order to highlight that size does matter. You were quick to say that 2 inches is unusable but where is the point that it begins to be usable? Would it be 3 inches, 3.3 inches? If, say, 3 inches is the starting point of usability then does it not stand to reason that bigger than 3 inches would be more usable?
If portability were not an issue you would want the largest display possible but for a phone portability is an issue so the size has to be somewhat less than infinite. For 20 plus years the year-over-year trend was to make phones smaller and so long as it was only a phone that was fine, but when you demand more of a phone, a smart phone, then the 2 inch displays of the Razor etc just don't cur it. The old paradigm of smaller is better is so ingrained that it is the default position of many even as they have to see that larger is more usable.
So, there will be a range of sizes based on what individual customers feel is the right size for them, but there will always be a trade off between small size and usability. The phone makers will continue to produce larger phone until they are too big and too few buy them. I hope they continue to offer the smaller less usable phones but once again, if the volume is insufficient they will drop the smaller ones to concentrate on what is selling.
I've played around with different sizes using AutoCAD and for me 5 inches will likely be my sweet spot so long as the bezel is kept to a minimum. I'm not so hung up on thinness that I will easily sacrifice battery life, and, in addition, I think the really thin phones are more difficult to hold even though they tend to be lighter. You could make a 5 inch phone that's just over a quarter inch wider than the iPhone but about 5/8 inch longer. I wouldn't make the phone thicker than needed but I'd want a battery of at least 2500mAHr capacity. And, back to the resolution, I'll repeat that I'd want 1920x1280 or, perhaps 1920x1080.
I'd guess that 5 years from now the average smart phone will be over 4 inches and probably closer to 4.3 inches but there will likely still be a few small ones in the 3.5 inch range as well as some pushing beyond 5 inches.
Brian