If they'd have minimal bezels, for comfort, in an iPhone 5 body we'd have about ~5.2" available for the screen. Unfortunately keeping the bezels for the fingerprint reader, earpiece, and front camera (~60% screen to body ratio) means that while it would fit better in small hands, the small screen may not give a great experience with today's content (sites, apps), or our eyes.
My old iPod Touch 5th gen. was quite a shocker for everyone who nostalgically reminisced about the good old times of small screens. I guess it depends what one expects from the phone.
