The rumors on the iphone 5 go back and forth. A few months ago there was rumor after rumor that it was going to have a 4.0 or 4.5" screen, and now, the very latest "size" rumor is indicating that it will still have a 3.5" screen.
What I personally expect is that Apple will stick to the 3.5" screen but work on making the phone MUCH smaller, as close to the size of an iPod Touch as possible and they will almost definitely introduce 4G/LTE in the next version as well as a new mini dock connector and probably elminate the physical home button and replace it with a proximity/touch based sensor.
For people who want a somewhat larger screen device they will direct them to the iPad "mini" that will probably be released at the same time, with a 7.85" screen.
It's 99% certain that the iPhone 5 will have a different form factor and possibly cradle connector, so it will require a new dock adapter from BMW, which I would expect could lag the release of the phone by as much as six months.