Despite all the rumours over an iPhone 5 with a slightly bigger screen, there remains one very important issue; the fact that the effective display dimensions never match the actual dimension of the display itself.
This means that a 3.5-inch screen like the one on the iPhone 4 will have a thin 1mm frame (visible on the front side) and the actual screen itself, when viewed from the back is actually way bigger.
iFixit has a closeup picture of the iPhone 4 front glass panel which clearly shows that Apple would have NO margin to play with if it wants to increase the size of its screen by a few millimeters.
There's another factor that many have forgotten to account for; Apple will have to stick to a 3:2 screen ratio whatever configuration it chooses; this is what dictated the screen resolution of the iPhone 4 and what will determine any future change in resolution.
And any change in resolution will have to fit the "Retina Display" range of pixel density (326 pixels per inch for the iPhone 4); adding a random number of pixels is not likely to happen as it would cause massive headaches to developers.
The absolute biggest screen size (see below) we've managed to fit on a virtual iPhone chassis is 56.1mm x 84.2mm which gives you a diagonal size of 101.17mm, a smidgen over 4-inch.