If Apple really does an edge-to-edge screen on the iPhone 5, which makes sense, I wonder which of the ways they will do it:
1) Keep the screen identical to what it is now, and shrink the rest of the phone around it. Cool because it's a smaller overall iPhone, but doesn't give a bigger screen.
2) Keep the current 640x960 screen resolution and just stretch it a little to be a bigger screen. Apps won't have to change at all, everything would be slightly bigger. No changes to apps is a huge plus, and likely is a major reason to do it this way. But this lowers the dots per inch. If my math is right, you can do up to a 3.8 inch screen at 640x960 and that's just above the magical 300dpi "Retina" resolution.
3) Increase the resolution of the screen, so the center 640x960 part is the same size as before, but now more pixels around that. Existing apps could run as-is in an inner area of the screen, really looking exactly as they do now with a black/white bevel around the edge of the screen. Updated apps would use the bigger resolution and go edge-to-edge.
There are even a couple interesting new resolutions: 1024x768 is the iPad resolution and 1280x720 is one of the HD video resolutions. Unfortunately, the HD one may be too tall. Stretching the screen to fill the space on the current iPhone 4 looks like about 40 pixels on the left and right would do it. That would be 720 wide--the nice HD video number, but adding the same on top and bottom is only 1040, quite a bit short of widescreen HD.
The iPad one is easier to reach, with a slightly wider iPhone screen. But really the device would not be much wider than when it's in some of the cases now, or the width of earlier generation iPhones & iPod touches (taking into account the outer edge of the curved 3G/3GS ones)
I'm going to guess #2, because of the big advantage of keeping the resolution the same for developers.