I think they should give you the option to remove the nav bar in favor of something like the cameras controls. Push somewhere on the screen and then a number of options pop up.
The biggest problem is games. IMO, most games on phones suck due to it being a touch screen and you having no...
A 5 inch screen would provide...4.7 inches or so of actual screen real estate when you factor in the softkeys, so yea, I'd definitely take a 5 inch screened Nexus.
I would even be fine with it being a little thicker if it meant a bigger battery.