Please tell me how offering an 3.5" iPhone "s" and 4.3" or 4.5" iPhone "L" side by side, one for $199 and one for $299 is in any way diluting a brand, image, or quality control?  Hell Apple still currently sells the 3GS, iPhone 4, and 4s.  Resolution/app settings aside (which I think can be figured out if they wanted to work enough at it) how does that hurt Apple or consumers?  Please honestly answer me that.
 
As far as quality goes...yeh.  iPhone 4 antenna issues, screen issues on the iPad 3, battery issues on 4s, original iPads being practically unusable on iOS 5.  High succeptibility to shattering on the 4/4s.  Ect.  Apple isn't exactly immune from quality/construction issues.
 
And to quiet people about my Apple opinion I've got an iPhone 4, 4s, Ipad 3, MBA, and an Apple TV in my house.  I also had a first gen iPad that was practically unusable for web browsing after updating to iOS 5.  I'm quite familiar and do enjoy using their products.  At the time most were bought I did feel that they were the best choices available.  I just really do believe that some of the stubborness of Apple and some of it's loyal consumers is going to start working against them as the competition heats up.  Having a "big phone" and a "small phone" and letting the consumer decide really isn't asking for much.
 
We can't say how many people *really* want or don't want a bigger phone from Apple.  It's never been offered.  If you are already entrenched in the iOS market with purchases, backups, device integration, ect it's hard to leave.  But it's more of a hostage situation than by choice in that situation and isn't really an indicator that it's the phone size that people really want.  It's just that they are already heavily invested in the Apple ecosphere and it's not that worth it to leave.  That's where the "loyaty" comes into play.