iPad with cellular is not that much more expensive and the experience is much better. Hotspot kills the iPhone's battery life, so I don't see much practical use here, unless your iPad is RARELY connecting to it.
When they moved to a 4" display for the iPhone 5, I don't remember there being AS MUCH complaining that there wasn't also a newly updated 3.5" model.
Clearly, following that precedent, Apple is not going to update the 4" model will new specs. There will be some incarnation of it, maybe two. But certainly not a "new" one.