What I'm trying to say is that LCDs with extremely dense pixels exist. Projectors are one example; I tried to look up some specs but didn't find anything immediately useful. I know they can have the same resolution as a computer monitor and yet the LCD projection screen is tiny, probably a square inch or so. Such processes simply aren't used for computer monitors because not enough people would want them, according to someone's market research.
I would love a 20-inch 1920x1200 display personally but LCD vendors don't think enough people want them to make them viable on the market. There is no technical reason it can't be done, though.