From what I can see, it definitely is a 4" screen, an increase from the current 3.5" screen that the iPhone 4 and iPod touch sports.
This could well be what gets me to upgrade. Faster CPU and a better camera would help as well. It comes down to battery life as well. I know, I sound like a broken record on the battery issue but I think as mobile warriors, we need to be free from the power outlets.
Give me close to iPad battery life and I'll be happy.
Now, there's a chance this may not be legitimate. There is another picture that showed an elongated home button that I'm gonna make you click over the Macrumors and the original source to check out.
Why the elongated home button you ask? I don't know. I see a future iOS devices make use of the bezel and they would serve to some more sophisticated functions.