I think the sales of these and similar phones suggest a combination of two things that Apple may have underestimated:
Bigger screens are better
A lot of people want the biggest/most powerful phone that they can comfortably afford, use and cary around. Higher end androids have been growing in average screen size from the starting point set by the iphone.
Diversity = Choice = Good
Among those people who want big phones, there is diversity in pocket size, hand size, purse size & willingness to carry things around. Look at the other stuff they take with them. A lot of women carry around a big purse, for example. It might have 3-4 things bigger than a note in there that go everywhere. I choose a wallet for slimness. My mother's is a good 10X bigger than mine. If you carry around a wallet the size of a brick, a galaxy note is not an issue. When I wear a jacket, I can comfortably take a nexus 7 or kindle with me everywhere.
By committing to a single model Apple gains a lot. But, they also need to target a low common denominator for size. I wouldn't be surprised to see an iPhone 3', 4', 5' at some point.