I use a 5.1" screen, and I can see the difference very well. I also watch a lot of FullHD screencasts, and while the phone screen is too small to do read everything, most of the text is still readable. The trick is to watch the original 1080p video.
The problem of the in-between resolutions is blurriness introduced by scaling. 1080p content is very common, text rendered to such images is already rasterized to take advantage of that resolution. iPhone has to downscale 1080 lines and to 750 lines, the scaling factor is 0.6944. There is no way that the text will remain sharp and readable. So the text in most videos will not only be a bit smaller (that's physical screen size, 4.7 vs 5.whatever), but it will be blurrier. Low cost 720p screens have the same problem, but at least the scaling coefficient (2/3) allows for sharper result.
The problem is particularly evident with text, but it applies to all minor details
