Hm, iPod nano might actually be a viable idea.

I mean, now, when Apple (a) stopped sticking to the only resolution for all iPhone OS devices and (b) is putting much higher resolution screen into older package - maybe it might make sense for them to also put old resolution (320 x 480) into smaller package?

The problems I see in these approach are the following:

1. How can one meaningfully make iPhone smaller/more energy efficient/cheaper?

2. Do people need a smaller iPhone? Is physically smaller touch screen as usable?