(quote from engadget's liveblog at http://www.engadget.com/2012/09/12/apple-iphone-5-liveblog/)
Nowdays I hold my phone in one hand, and use the other hand's index finger to manipulate the screen. It's vastly better than a physical thumb keypad for watching media, browsing the web, or viewing any other kind of information (all of which benefits from a larger screen, which is why—epecially as a guy with large-enough hands to do one-handed operation in a pinch even on a bigger screen—I prefer 4.3" screens over the 3.5" of the iPhone). It's also vastly better than a physical keypad for most other forms of interaction. But one-handed thumb usage has always been my mode of last resort for a touch-screen phone. So I like trading against the usability of that mode in exchange for more visible surface area.
I agree with this statement.
A larger display delivers a much better experience when reading text, watching videos, playing games or touching controls in apps.
I agree that the "I can reach the corner with my thumb" feature is an advantage. But that advantage pales compared to the fact that a large display (4.3+) significantly improves almost every action that people use on smartphones today.
IMHO the only reason Apple sticks with the sizes they use is because they built an operating system that is not designed for multiple screen sizes.
[edit: strange comment fail: I actually wote that I disagree with a statement that I actually agree with ;). fixed this now I guess]
See: text messagers, IRC users, ssh session runnners, angry birds players
Also check this out. The Droid RAZR M is just slightly taller than iPhone 4S, and I guess on par with the new iPhone - even though it has a 4.3" screen!
http://images.anandtech.com/doci/6242/DSC_8062_575px.jpg
http://www.technobuffalo.com/wp-content/uploads/2012/05/ipho...
I said it when he first posted it, and I'll say it now - the larger screen isn't a problem unless you have midget-thumbs, and the diagram is not true to the actual range of motion for the devices.
[1] If anything I prefer to use the phone two handed and in landscape.