I think that they might have picked the size due to ergonomics. It's hard and incovienent to use very small obejcts and Nintendo seems to target players of all ages.
You see this on the PS Vita as well: the memory cards, which are meant to be changed rarely if ever, are roughly the size of a microSD card while the game cartridges are probably double the width and height even though the storage capacity of the carts tend to be much less (2-4GB) than the memory cards (8-64 GB).