My guess for Future iPhones.
Really the size is about right. Big enough screen to be useful, but small enough to fit in a pocket. It could get a fraction bigger by having less border, but that's about it.
The biggest unused space on the whole thing is the back. My crazy guess is double-sided, with identical screens front and back. With motion detection (easy to detect a 180 degree flip) and/or the same "it's close to your face" type sensors, it would be able to figure which side is up and active. My screen after months doesn't have a scratch so is plenty durable.
This would get around the only one program running at a time limit (well, increases it to two.) Use the program, flip to use a different one, flip back. Crazier things have happened :)
(Added 2/7/2009)
After reading about the new updated Kindle coming, I thought, maybe put a small bit of the "e-paper" sort of thing it uses on the back as the 2nd screen. Not sure if that's cheaper than a whole full-size screen--but it probably is.
I don't think the e-paper stuff needs electricity to show stuff the way a regular screen does. Would be perfect for text messages, showing new emails, etc.
That would be cool too!