We don't want to use the term "iPhone nano" because we've heard it before, both formally and informally. Yet, it isn't unreasonable to guess that Apple will release additional iPhone models, a small one among them.
According to Everything iCafe, Apple has applied for a patent which describes a hinged phone with a "dual sided trackpad", implying that it could be operated (at least certain functions) with the "lid" open or closed. When the iPhone was first introduced, prior to its release, I imagined the lack of a lid would be a detriment (I'm scratch-phobic). Yet, the only scratches my iPhone has acquired are on its rear (poor little guy).
Of course, Apple -- like so many other companies -- patents ideas and such that they'll probably never use. So, take the whole thing with a grain of iSalt.