Lets think about the phones/MID's I have owned at 800x480px over the past two years:

Xperia X1, HD, HD2, Touch Diamond 2, Touch Pro2, n900, TG01, n800, n810, Archos 5 Android. They range from 3"-5".

All in search of the perfect e-reading and surfing experience so I have a reasonably good idea of what I can be achieved at this resolution and when it becomes limiting.

I would prefer a 4" 960*640 screen over a 5" 800*480 any day, higher PPI REDUCE your need for larger screen sizes while increasing clarity. And given that we are in the mobile arena and need to use the device to make calls, the emphasis on PPI becomes even more apparent.

The 4.3" HD2 has the sweetest size form factor in my experience sans keyboard (but I would want one e.g slim n810 one and replace its D-pad with a trackpad). It could probably house a 4.5" screen by a pure glass face and that would be about my limit of comfort for a handset. 120.7 * 67 mm